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UPDATE 2-Merkel, Macron pledge to lead EU forward post-Brexit

* EU leaders talked past midnight in Estonia

* German chancellor praises French president's vision

* Macron sees "things moving forward", others wary

* All agree to review way ahead at Oct. 19-20 summit (Adds German further detail on position, paragraph 12)

TALLINN, Sept 29 (Reuters) - French President Emmanuel Macron won backing from Angela Merkel for plans to reform the European Union after Brexit, founded on what the German chancellor called "intense" cooperation between Paris and Berlin.

But many leaders remained wary of ambitious new projects, doubting the appetite of voters for giving up national control and fearing the continued strength of anti-EU sentiment that is taking Britain out of the bloc and saw the far-right win dozens of seats in the German parliament in Sunday's election.

"Last night's discussions showed there's a common realisation of a need for a leap forward in Europe," Macron told reporters on Friday after an EU summit dinner that stretched beyond midnight in the Estonian capital Tallinn.

"Today we're all convinced Europe must move ahead faster and stronger, for more sovereignty, more unity and more democracy."

Macron voiced satisfaction with summit chair Donald Tusk's commitment to report back to EU leaders when they meet again in three weeks with proposals for concrete steps to be taken.

Tusk himself referred to a profusion of reform initiatives, such as those from Macron in a barnstorming pro-European speech at the Sorbonne on Tuesday and by European Commission President Jean-Claude Juncker earlier this month.

But Tusk, a former Polish premier, also added a note of caution, urging a "step-by-step" approach to "real problems".

He insisted the EU needed to maintain unity in the face of conflicting views about so many new initiatives: "Even though some may think it is a kind of a Eurovision contest, and perhaps it is, I am personally convinced that together, we will make good use of it, if we sing unisono."

Merkel, re-elected for a fourth term on Sunday but weakened by the rise of an insurgent eurosceptic opposition, met Macron for half an hour before the dinner and, according to a French aide, welcomed his speech as "visionary" and a return of co-founder France as a driving force in the European Union project.

But she also noted differences. Some of her potential new coalition partners, along with northern governments like the Dutch and Finns, are very dubious about his suggestions for pooling budgets with less fiscally austere states in the south.

"As far as the proposals were concerned, there was a high level of agreement between German and France. We must still discuss the details, but I am of the firm conviction that Europe can't just stay still but must continue to develop," she said.

Merkel is happy to play what she sees as a traditional role in a partnership that has driven the Union for 60 years, German officials say, with France back on form as a creative force and Berlin building consensus and helping put ideas into practice.

"AVOID MIRAGES"

Macron faced a reality check of scepticism from leaders wary of his talk of ambitious "horizons" for the continent. The no-nonsense president of euro zone member Lithuania, Dalia Grybauskaite, tweeted during the dinner: "European horizons drawn. Important to avoid mirages in the desert on the way."

Dutch Prime Minister Mark Rutte told reporters countries needed first to reform their own economies: "You're starting with the end point ... There is a discussion about a European finance minister -- but no one has told me what he would do."

British Prime Minister Theresa May also attended the dinner, despite Britain's increasing isolation as it prepares to quit.

She took the opportunity of Friday's "digital summit" in Tallinn to visit British troops on a NATO mission in northern Estonia and pledged post-Brexit security cooperation with European neighbours confronting Russian threats.

May arrived knowing that a keynote major Brexit speech she made last Friday succeeded in unblocking talks in Brussels this week on Britain's divorce package -- though the leaders in Tallinn were at pains to avoid appearing to negotiate with her.

The chief EU negotiator, Michel Barnier, praised on Thursday a "new dynamic" to Brexit negotiations created by concessions made by May, although progress was still not sufficient to allow discussions on future trade relations.

That message was rammed home by Juncker, Barnier's boss, who told reporters in Tallinn that it would take "miracles" to have sufficient progress by next month and he did not expect that -- effectively ruling out EU leaders giving a green light to trade talks when they meet in Brussels on Oct. 19-20.

Friday's talks on a "digital agenda" for Europe ranged from cross-border data flows and privacy to cybersecurity and taxing online businesses. (Additional reporting by Julia Fioretti, David Mardiste and Andreas Rinke in Tallinn, Elizabeth Piper in Tapa, Estonia and Alastair Macdonald, Robert-Jan Bartunek, Jan Strupczewski, Foo Yun Chee and Alissa de Carbonnel in Brussels; Writing by Alastair Macdonald; Editing by Gareth Jones)