By Alessandra Prentice and Oleksandr Klymenko
KIEV/NOVOLUHANSKE, Ukraine (Reuters) - Fighting in eastern Ukraine has escalated to the worst level in months, officials monitoring the conflict said on Tuesday, after the shelling of a frontline village wounded eight civilians and destroyed or damaged dozens of homes.
A Russia-backed insurgency erupted in 2014 and the bloodshed has continued despite a ceasefire deal that was meant to end a conflict in which more than 10,000 people have been killed, with casualties reported on a near-daily basis.
The Organisation for Security and Co-operation in Europe, which monitors the implementation of the peace agreement, said it had recorded 16,000 ceasefire violations between Dec. 11 and Dec. 17, a 35 percent increase on the week before.
"We note with concern a sharp deterioration in the security situation with ceasefire violations reaching levels not recorded since February this year," chief monitor Ertugrul Apakan said in a statement.
In February, a surge of violence around the government-held industrial town of Avdiivka cut off power and water to thousands of civilians on the front line.
Apakan said the latest escalation reflected an established trend "in which a recommitment to the ceasefire by the sides was followed by a steady increase in the level of violence, culminating in fierce fighting".
Apakan's comments followed warnings from aid agencies over the humanitarian situation in the eastern Donbass region, particularly given Monday's attack on the government-controlled village of Novoluhanske.
The United Nations' OCHA humanitarian arm said on Twitter heavy shelling near Novoluhanske was affecting 2,000 residents.
People are fleeing the area in blizzard conditions, it said.
Eight civilians were wounded and more than 50 buildings were damaged in the shelling, which also temporarily cut power supplies, the regional Kiev-controlled Donetsk administration said.
A Reuters witness saw residents picking their way through the rubble of destroyed homes and surveying fire-blackened buildings.
The U.S. State Department said the humanitarian situation was "dire" because of the shelling, which it blamed on Russian-led forces firing Grad multiple-launch rockets.
The Ukrainian military on Tuesday accused pro-Russian separatists of deliberately firing more than 40 times from multiple-launch rocket systems at Novoluhanske.
Meanwhile, the rebel command said attacks from the Ukrainian side had almost doubled in the past 24 hours, according to separatist news website DAN.
Rebels deny attacking Novoluhanske and say the Ukrainian military fired at the village to justify their attacks on separatist-held civilian areas, according to DAN.
The U.S. State Department also voiced concern about fighting around the Donetsk water filtration station, which has a system of pipes that carry chlorine gas.
"If those were to go off in this area, which is close to where people live, it could be potentially devastating," State Department spokeswoman Heather Nauert told a briefing.
She said civilian water workers were trapped in the station's bomb shelter and could not get out because of fighting.
In an effort to end the deadlock, the international community, including the United States, has in recent months been advocating for the deployment of U.N. peacekeepers in the Donbass.
Both Kiev and Moscow backed the idea but disagree on whether the troops should be positioned on the rebel-controlled part of the Ukraine-Russia border, so no decision was made.
Russia denies accusations from Ukraine and NATO that it supports the rebels with troops and weapons.
(Reporting by Alessandra Prentice and Oleksandr Klymenko; additional reporting by David Alexander; Editing by Alison Williams and Grant McCool)