By ISMET HAJDARI Associated Press Writer

PRISTINA, Yugoslavia (AP) -- The United States and its allies are urging both sides in Kosovo

to compromise, after Serbs and ethnic Albanians rejected Washington's latest formula for

bringing peace to the troubled province.

U.S. envoy Christopher Hill arrived today for a series of talks with representatives of

pro-independence Kosovo Albanians, including an expected meeting with the political

representative for the ethnic Albanian guerrillas.

He came after Secretary of State Madeleine Albright criticized the two sides, warning the Serbs

to stop threats of new offensives and telling the ethnic Albanians to abandon their ``rhetoric of

independence.''

Last week, Hill offered a revised U.S. formula for greater self-rule for Kosovo, a province of

Yugoslavia's Serb republic but with a majority ethnic Albanian population.

But both sides rejected the formula. A Serbian negotiator, Ratko Markovic, said Tuesday the

U.S. draft would require ``reconstructing the whole of Yugoslavia'' and would pave the way for

independence for the majority ethnic Albanian province.

The chief ethnic Albanian negotiator, Fehmi Agani, said it favored the Serbs. And Adem

Demaci, chief spokesman for the rebel Kosovo Liberation Army, suggested that Hill should be

replaced.

``Mr. Hill either doesn't understand the Albanian problems, or he is leaning toward the Serbs,''

Demaci said. ``The State Department should reconsider the results of his work ... (and) send us

more qualified people.''

Although the KLA rebels are not a party to the deliberations, their support is considered critical

to ensuring that any future plan actually brings peace to the province, where ethnic Albanians

outnumber Serbs 9-to-1.

Hundreds of people were killed and almost 300,000 ethnic Albanians forced from their homes in

a seven-month crackdown on separatists by Serbian forces. An October peace accord halted most

of the fighting.

The accord, reached under threat of NATO airstrikes, was seen as a way to buy time to find a

diplomatic solution. But with little sign of progress, fears are mounting that full-scale fighting

could erupt with warmer weather in the spring.

In Brussels, Belgium, NATO foreign ministers endorsed U.S. diplomatic efforts to resolve the

crisis and called on Serbs and ethnic Albanians to ``move rapidly in a spirit of compromise and

accommodation.''

The ministers on Tuesday endorsed a plan that would give Kosovo ``a substantially greater

degree of autonomy and meaningful self-administration'' but said any settlement must respect the

territorial integrity of Yugoslavia.

The Americans and Europeans fear independence would lead to similar demands by other ethnic

Albanian communities elsewhere in the southern Balkans.

``Both Serb and Albanian leaders have made public statements that do not help the cause of

peace,'' Albright told reporters in Brussels. ``Serb threats to launch a renewed offensive in

Kosovo are dangerous and we view them with extreme seriousness.''

Albright also said the ``Kosovo Albanian insistence on rhetoric of independence and rejection of

the ... draft agreement do not help us to move forward.''

AP-NY-12-09-98 1018EST