"Bosnia closer to peace," read yesterday's banner headline in the Sarajevo daily Oslobodjenje. But people were sceptical. "Even though things are moving forward I'm not that optimistic. I'd like to be an optimist but I'm afraid to be, given the disappointments we had in the past," Ahmed Hadzirovic said. "What makes people think the Serbs would live up to any agreement?"
Serbs in their northern stronghold of Banja Luka, now in range of government artillery for the first time since the war began, had their own reservations. "We all fought to unite with Serbia and we will fight again, but we will never accept living with Croats and Muslims together any more," Tomislav Gagovic said.
However, the remarks of the Bosnian Prime Minister, Haris Silajdzic, were tinged with optimism. "If the international community keeps this firm position, if it does not back down, does not get tricked by the regime in Belgrade - they are experts in this - I would venture to say we can have peace in weeks," he said in Sarajevo.
That optimism is probably explained by the commitment to a united Bosnia under the "Further Agreed Basic Principles". These include a central parliament and a presidency, in which the Serb entity would hold one third of the vote, and a demand for free and democratic elections as soon as possible.
Belgrade presented the deal as a triumph for the Serbian President. Belgrade Radio said: "This is our victory - and a victory for Slobodan Milosevic and his policy of peace."
The Foreign Minister of the rump Yugoslavia, Milan Milutinovic, called for a ceasefire within a week across Bosnia-Herzegovina to pave the way for an overall peace settlement. "We need some kind of political framework of cessation of hostilities which has to be arranged during the coming days, end of this week or beginning of next week," he said.
The Bosnian President, Alija Izetbegovic, set conditions for a ceasefire. He said he could accept a cessation of hostilities only if the Serbs restored utilities in Sarajevo and civilian traffic on a road through Serb territory to Kiseljak and opened a land route to the government-held enclave of Gorazde.
He also insisted that civilians must replace military authorities in Serb-held Banja Luka and the "ethnic cleansing" of Muslim and Croat civilians from that region must stop.
If round one - the "Basic Principles" agreed at Geneva three weeks ago - went to the Serb rebels, with the de facto recognition of their "Srpska Republic", round two has gone to the Sarajevo government. The creation of a joint authority is bound to undermine Bosnian Serb hopes of eventual secession. Radovan Karadzic, leader of the "Srpska Republic", spoke of the document as "a further step in the direction of peace". But he knows that a peace deal is still far away.
The statement by the negotiators, led by the US envoy Richard Holbrooke, admits that many vital areas were not addressed in New York: "Above all the territorial issues are still unresolved and will be the subject of very tough negotiations."
"The fundamental differences that have existed throughout this war continue to exist," said one analyst in Zagreb. Elections to a joint assembly "implies them living together," he said sceptically. As the foreign ministers talked peace in New York, the Bosnian Serb army fired four rockets at three Croatian towns, while the UN confirmed that Serb forces had fired a Frog-7 missile into a fourth town on Monday night.
"The UN condemns the attacks in the strongest possible terms, especially as they come amid news of progress in the New York peace talks," said UN spokesman, Chris Gunness.
Mr Silajdzic said two people were killed and several wounded by a cluster bomb fired at the government-held town of Travnik yesterday. "They are trying to find the best way to stop the peace process," he said.
"I cannot believe that people want to live in separate pens," said Derva Ovcina, a Bosnian Muslim refugee in Zagreb. "I'm not seeking a place for myself but a place for everyone. I cannot have Bosnia for myself. We were always three peoples and that is how it should remain."