YUGOSLAVIA has been in an escalating crisis for two years. But tensions created by ethnic Serbians in the neighboring republic of Croatia pose the most serious threat to Balkan harmony so far. The idea that small villages and enclaves of Serbians in Croatia can declare ``independence'' is sheer folly - much as if the barrio in Los Angeles suddenly declared itself an independent state of Mexico. The logistics alone are impossible. Yet that is the position of ethnic Serbs who, as 12 percent of the population, are arming themselves in Croatia - no doubt with the underground blessing of Serbian President Slobodan Milosevic, whose bristling nationalism, if unchecked, could bring Yugoslavia's two strongest republics to civil war.
Mr. Milosevic wants Yugoslavia to retain its centralized Marxist self, with Serbia calling the main shots. Other republics, Croatia and Slovenia chief among them, want a loose confederation of Yugoslav states. A loose confederation scares ethnic Serbs in Croatia, who feel they will be treated unfairly in a new political arrangement.
If the Croatian Serbs persist, their fears may become self-fulfilling. The Croatian population, which has been somewhat patient, is stirring ominously. Twenty Serbs and Croats have died in clashes in the past two weeks.
The peace plan begun last week is a modest attempt to keep the two sides talking, and allow the federal Yugoslav army to keep armed factions at bay. It is incumbent on the federal army to be utterly impartial, since Croatians already suspect, with some reason, that the army's sympathies tend toward the upstart Serbs.
Croatian President Franjo Tudjman has a balancing act to perform. A too-moderate response will open him to attack politically; a too-harsh response will throw the crisis into further turmoil.
Reasoned, anti-inflammatory rhetoric is needed by leaders on all sides. In a bit of serendipity, today the office of the rotating presidency of Yugoslavia shifts to the Croatian member Stipe Mesic. Mr. Mesic is reported to be a conciliator. He must seize the moment to work with federal Prime Minister Ante Markovic and keep all sides talking. The alternative is stupid, regressive, draining conflict.