Croatia's checkered flag lies at the entrance of the newly established Serbian police station in this northeastern Croatian town.

People walk over it, wipe their shoes on it, even spit on it."We are free now, and this region is not a part of Croatia any more," said Radoslav Zdjelarevic, new police chief of the Baranja region. The region stretches from the Hungarian border to the Croatian stronghold of Osijek, 140 miles east of Zagreb, Croatia's capital.

On Tuesday, Serbian rebels captured Bilje, the last Croatian stronghold in the Baranja. The region is inhabited by Serbs, Croats and ethnic Hungarians.

Ilja Cesar, 34, led the attack, boosting his reputation among Baranja's Serbs. He and his men don't hesitate to admit they violated an EC-sponsored cease-fire signed by all Yugoslav leaders early Monday.

"The European Community cannot tell us what we will do on our land," Cesar said. "If they send observers here, they could all be killed."

His defiance reflects the forceful emotions powering Croatia's undeclared war, which has killed more than 300 people since the republic declared independence June 25.

Fear and ghosts of the past fan hatreds between the Orthodox Serbs and Roman Catholic Croats, who speak the same language but are divided by centuries of different history.

Once the nationalist government of Croatian President Franjo Tudjman won Croatia's first free elections after 45 years of Communist rule, Serbs began to see specters of the Ustasha Nazi puppets who ruled Croatia during World War II.

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Serbian propaganda dwelt on the hundreds of thousands of Serbs slaughtered in death camps.

Croats said they were only removing vestiges of Communist power. That included replacement of Serbs deemed Communists in several state sectors, particularly the police.

Now, emotions have turned ferociously violent.

At Bilje on Tuesday, at least three Serbs and 14 Croats were killed, according to figures from both sides.

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