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E Slavonia agrees to rejoin Croatia

Erdut, Croatia (Reuter) - Rebel Croatian Serbs in Eastern Slavonia agreed yesterday to rejoin Croatia, lifting the threat of fighting over the territory that could have wrecked peace hopes in the Balkans.

The UN mediator, Thorvald Stoltenberg, said after Serb leaders signed a peace draft at their Erdut headquarters: "I think we have experienced the start of the end of the war in ex-Yugoslavia."

Mr Stoltenberg and the US ambassador, Peter Galbraith, presented the Serbs with a draft worked out at the Balkan summit in the United States by President Franjo Tudjman of Croatia and President Slobodan Milosevic of Serbia.

The mediators later returned to Zagreb for the agreement of Croatia's government to the terms ending a Serb rebellion that erupted into war when Croatia broke away from former Yugoslavia in 1991. The Croatian army recaptured two other rebel enclaves earlier this year and Mr Tudjman threatened to use force in Eastern Slavonia if the Serbs did not back down by the end of November. Zagreb alarmed the UN last week by reinforcing its troops in the region, which borders Serb-dominated rump Yugoslavia and was regarded as a potential flashpoint for a renewed war between Croats and Serbs.

The chief Serb negotiator, Milan Milanovic, said he agreed to a one-year period of transition to Croat rule with the option of a further year if needed.

A text of the agreement said the UN would administer the territory and provide peacekeepers during the transition. The area would be fully demilitarised within 30 days of UN peace-keepers and police being deployed. There was no mention of a Serb demand for a referendum at the end of the transition period to settle whether Eastern Slavonia should be Croat or Serb.

The mediators said that the agreement would preserve the multi-ethnic character of Eastern Slavonia, allowing the return of almost 100,000 Croat refugees driven out in 1991. It will also let Eastern Slavonia's Serbs remain.