NEWS ANALYSIS : Balkan War Looms as Croatia Widens Its Reach : Europe: One observer says the ‘end game’ has begun. Analysts predict Croatian assault on rebel-held Krajina.

ZAGREB, Croatia — 

Sourly survey the litter of a failed peace initiative. Assay the shreds of yet one more stillborn cease-fire. Such pathos led more than one thoughtful observer to a sobering conclusion here Monday: Grab your helmet. Another Balkan war is coming.

A U.N. officer observed: “We’re now in the end game. There’s no room for any optimism. The chances of war are better than even.”

A senior official of the North Atlantic Treaty Organization said: “There is an old military maxim that says you can do many things with a bayonet--except sit on it. The bayonet is drawn.”

The Balkans’ capacity to shock is limitless. But the least surprising thing that can happen this week in the judgment of seasoned analysts is this:

* Croatia attacks the rebel Serb territory of Krajina inside its borders with a powerful, well-prepared army, which is now poised to strike.

* The international community expresses concern but doesn’t do anything.

* The United Nations watches, impotent.

* Serbia is angry but doesn’t intervene on behalf of the Croatian Serbs.

Artillery exchanges Monday across the border between Croatia and Bosnia-Herzegovina punctuated the failure of weekend peace efforts.

U.N. officials said that the rebel Serbs had not continued withdrawals reported Sunday and had reneged on promises to halt attacks on the besieged Bosnian enclave of Bihac.

On balance, U.N. sources said, the Krajina Serbs’ promises to U.N. special envoy Yasushi Akashi on Sunday seemed principally an attempt to buy time to build up defenses around their self-declared capital at Knin.

Croatia, for its part, rejected a proposed cease-fire that never occurred. Instead, it demanded negotiations that would lead to re-integration of the secessionist Serbs into Croatia.

The demands were patently unacceptable to Serbs who broke away from Croatia in 1991, seizing nearly one-third of Croatian territory and proclaiming their own republic. While Bosnia burned next door, a truce within Croatia largely held from January, 1992, until May, when Croats retook a swath of land in a lightning strike.

“Now, Croatia has concluded that it is in its overwhelming national interest to recapture as much of Krajina as possible as quickly as possible,” another U.N. official said. “The most we can hope for is to try to slow down the process and perhaps limit the bloodshed.”

With the international community furious at Serbs in Bosnia for their capture of two U.N. “safe areas” last month, the Croats expect only a slap on the wrist for resolving what, to them, is an internal matter of paramount importance.

If Croatia recaptures Krajina, said one observer, it will remove a major irritant from the explosive Balkan mix, allowing the international community to focus fully on intractable Bosnia. “The Americans and the Germans have given the Croatians the green light to do something fast and clean,” one analyst said.

Wrong, said Peter W. Galbraith, the U.S. ambassador to Croatia, in an interview Monday. “There is no green light for military action within Croatia. We are prime sponsors of the peace process and remain fully committed to finding a negotiated settlement in Croatia,” he said.

No one will be caught wrong-footed, though, if the Croats attack in the next few days. Or if the Krajina Serbs fire rockets at Zagreb in retaliation as they did in May.

In Washington, where the Clinton Administration awaited the expected House vote today on lifting the international arms embargo against the former Yugoslav republics, the defense secretaries of Britain and the United States expressed concerns that continuing attacks by Croatian troops around Bihac might lead to a widening of the war.

After a 2 1/2-hour conference, U.S. Defense Secretary William J. Perry indicated that the allies had been relieved initially to see Croatian troops force Bosnian Serb forces out of Bihac without need for intervention by the West.

But, he said, “what we want to deter is to have the Croatian forces now take advantage of that situation to launch a full-scale offensive, because we believe that has the potential of widening the war, to the great danger of everybody involved.”

British Defense Minister Michael Portillo agreed. “There is a greater prospect than before of the Croatians being involved in a wider war, at least with the Bosnian Serbs,” he said in an impromptu news conference with Perry just after their meeting.

As a result, Portillo said, Britain will “continue to urge restraint” by the Croats “so that we won’t see this conflict becoming deeper and broader, with much greater loss of life, in the future.”

In mid-July, analysts believe, the Krajina Serbs committed a major blunder when they crossed into northwestern Bosnia to join Bosnian Serbs and rebel Muslims in attacking the Bihac pocket, where about 160,000 Muslims live.

In response, Roman Catholic Croatia pledged increased military support for Bosnia’s Muslim-led but non-sectarian government.

A powerful Croatian force, which the United Nations estimates at more than 10,000 troops, attacked Serb-held areas of western Bosnia last week, capturing two key towns and putting Croatian guns within range of Knin.

U.N. observers reported Croatian artillery attacks in the direction of Knin on Monday, but there was no immediate sign of any infantry follow-up.

The Croatian successes have relieved pressures on the Bosnian government’s 5th Corps in Bihac--and have incidentally short-circuited any demand on the United Nations or NATO to help defend the area.

The town of Bihac, the enclave’s capital, is a U.N.-declared safe area--like Srebrenica and Zepa, enclaves that were captured by the nationalist Serbs despite international outcry.

At the same time, the Croatian intervention is widely understood to be preparation for a direct assault against Krajina. U.N. sources say highly mobile infantry units backed by armor--the unsheathed bayonet--are massed on the Croatian side of the cease-fire line with Krajina.

All that is lacking for a new war to begin, say NATO officials, is for Croatian President Franjo Tudjman to issue the order.

Times staff writers Norman Kempster and Art Pine in Washington contributed to this report.