Leaders of the 28-member European Union met to debate the issue of migration on Friday, facing demands to deliver reform to end boat refugee deaths.
Allegations that the US had tapped Chancellor Merkel's mobile phone were also a major focus on day two of the summit.
Italy and Malta, which have been confronted with a number of recent boat refugee incidents along Europe's outer border pressed for a coordinated response from all EU nations.
Italian Prime Minister Enrico Letta said the capsize deaths of 366 people off Italy's island of Lampedusa on October 3 "cannot repeat itself."
European Parliament President Martin Schulz told leaders on the summit's first day on Thursday that Lampedusa had become a "symbol of a European migration policy which has turned the Mediterranean into a graveyard."
Some politicians want the EU to change is so-called Dublin rules, which force asylum-seekers to first enter the bloc's territory before being able to submit an application.
Reform ideas include the setting up of legal EU migration corridors that would put people traffickers out of business.
Foot-dragging on banking union
An ambitious timetable for banking union within the eurozone was also on the summit agenda, amid signs of integration fatigue.
A summit policymaker quoted anonymously by the Reuters news agency said doubts were emerging over more transfers of power from the national to pan-European level after five eurozone bailouts over the past three years to member states including Greece and Cyprus.
This reluctance was compounded by fears that anti-European parties could gain ground in next year's European Parliament election.
Anger over spying claims
EU leaders entered talks Friday still united in anger after reports during their first summit day on Thursday of widespread US spying on its allies' communications by its National Security Agency (NSA).
In the early hours of Friday, European Council President Hermann Van Rompuy invited other EU members to join Germany and France in seeking "before the end of the year" a trust-based "understanding" with the US on intelligence gathering.
Asked about Britain's deep intelligence ties with the US, Rompuy said all 28 EU member nations were "on board with this text."
Earlier, Merkel had said "trust between partners" needed to be "re-established."
French President Francois Hollande said a special EU team appointed to review leaks by the fugitive former US intelligence contractor Edward Snowden needed to "accelerate their work with our American allies."
More tensions seemed imminent with a fresh slew of damaging claims by Britain's Guardian newspaper that the US had listened in on the conversations of 35 world leaders.
ipj/pfd (AFP, dpa, AP, Reuters)