President Barack Obama said on Friday the United States and its allies were "tightening the noose" around Qaddafi and European Union leaders meeting in Brussels said they would consider all options to force the Libyan leader to step down.

However, the 27 leaders meeting in Brussels stopped short of endorsing air strikes, a no-fly zone or other military backed means to achieve that goal.

Libyan rebels said their three-week-old insurrection could fail without a no-fly zone.

The summit side stepped a British and French initiative for a U.N. Security Council resolution that would authorise a no-fly zone.

They also would not back French President Nicolas Sarkozy's call to follow his lead and recognise the National Libyan Council as the country's legitimate authority, or his call for "defensive" air strikes against Qaddafi's forces if they used chemical weapons or warplanes against civilians.

Libya suspended diplomatic relations with France.

Obama, accused by critics of reacting too slowly, told a news conference he believed international sanctions, an arms embargo and other measures already in place were having an impact but also said a no-fly zone remained an option.

"Across the board we are slowly tightening the noose on Qaddafi.

He is more and more isolated internationally," he said.

"I have not taken any options off the table."

Soon after he spoke, the U.S. Treasury Department said it had extended a freeze on assets to Qaddafi's wife, four of his sons and four senior officials in his government.

The Arab League will discuss the no-fly zone and the idea of extending formal recognition to the rebels at a meeting on Saturday.

                                                           COPYRIGHT REUTERS, 2011