Pockmarked by bullet holes and squatting alone in a no-man's land between Greeks and Turks, the once-stately Ledra Palace Hotel here is a forlorn monument to the seemingly insoluble division of Cyrpus.

At one time one of the grand hotels of Britain's colonial empire, its days of glory are long gone and today it is inhabited only by Canadian soldiers assigned by the United Nations peacekeeping forces to patrol the "Green Line" dividing the hostile Greek and Turkish communities of the capital.

A few signs of new activity around the Ledra Palace coincide with new activity on the negotiating front. The hotel's new-tattered ballrooms are being spruced up to host a new round of U.N.-sponsored peace talks aimed at reuniting the island, which was partitioned following Turkey's invasion of northern Cypus in 1974.

Even before the representatives of the Greek and Turkish communities gather in the Ledra Palace next month for their seventh attempt to reach an agreement since the invasion, the outcome hardly looks promising.

The last time the two sides got together under the aegis of U.N. Secretary General Kurt Waldheim's representatives was in 1977, when the discussions quickly collapsed in a semantical debate on an ill-defined concept called "bizonality."

The Turks demanded that the Greeks agree to the principle that Cyprus, if it was to have a united future, must be organized along "bizonal" lines. The Greeks, who are insisting on a federal solution, took this to mean some sort of extremely loose confereration.

The Greeks insisted on their own term, "biregionality," which they believed was not so pregnant with separatist meanings. The hair-splitting doomed the talks.

Before the talks resumed, it took U.N. Under Secretary Perez de Cuellar and his resident mediator, Hugh Gobbi, 14 months of tedius shuttle diplomacy across the "Green Line" to work out a new formula, acceptable to both sides.

But Gobbi had barely announced that the talks would resume on Sept. 16 -- on the basis of both sides' agreement of "support for a federal solution of the constitutional aspects and a bizonal solution of the territorial aspects of the Cyprus problem" -- when the deal began to fray.

Within hours of Gobbi's statement, Greek Cypriot President Spiros Kyprainou called a press conference to announce that he had made no agreement to accept bizonality on the thorny territorial questions. He had agreed, the president said, only that a bizonal solution was open to discussion in the talks.

The other shoe dropped two days later, when Archbishop Chrysostomos, head of the Greek Orthodox Church and a power among the Greek community, bluntly called the U.N. talks little more than an "opiate" to lull the Greeks to sleep. He called instead for a popular struggle to liberate Greek areas occupied by the Turks, who since 1974 had controlled 40 percent of the land.

Chrysostomos' call, and the memories it evoked of past intercommunal strife between the island's Greek and Turkish communities, is precisely what has made the Turkish community so unwilling to consider any return to the pre-1974 status quo. Backed as it is today by 26,000 well-armed mainland troops, the community rejects any solution that would not keep both communities geographically separate, with full guarantees against the violation of their security.

"The problem is that the past enmities and suspicions and experiences cannot be forgotten by the people," said Rauf Dentash, the leader of the Turkish Cypriot community. "The suspicions and fears of the past are a reality that we must accept and deal with.

"Mr. Kyprianou's problem is that he thinks these fears and suspicions do not exist."

"He keeps insisting that the Greek Cypriots did no wrong to the Turks and that we must go back to a situation like we had before, where we were dominated by a Greek government, and where no Turk's life was secure, not even in his own home."

Until the Turkish invasion of 1974 forced the regrouping of the previously integrated communities into two separate and divided territories, Cyprus was often the scene of vicious intercommunal fighting in which the Turks, who make up 18 percent of the population, more often than not came off second best. Each side blamed the other for triggering the strife.

The roots of the conflict are ancient, and predate both the 1974 invasion and the country's independence from Britain in 1960.

Known in mythology as the birthplace of Aphrodite, the goddess of love, Cypriot history was linked with that of Greece and Christianity until, during the collapse of Byzantium, the Turks invaded the island in 1571. The Turks dominated the island from that date until the British took control in the 19th century.

Like Archbishop Makarios, who led Cyrus to independence in 1960 and ruled until his death in 1977, Krypianou has not shown any signs of willingness to accept the fact that the Turks -- whatever the wrongs they have committed -- have had legitimate reasons to demand guarantees of their rights and security in an island where Greeks are a majority and old hates and enmities die slowly.

Kyprianou's own stand has increasingly brought him criticism from the Greeks, who feel that he has been too unbending and has missed several opportunities for compromise. Even AKEL, the Greek Cypriot Communist Party whose votes were instrumental in bringing him into power, has recently taken to attacking him for his instransigence.

"After Kyprianous's statement rejecting the agreement on principles worked out with the U.N., the whole thing may be up for renogotiating again, which may only give the Turks a chance to strengthen their own demands," said Glafkos Clerides, a Greek Cypriot politician who led the early intercommunal talk for the Greeks. "I'm afraid we may simply be back to square one."

Everyone expects the next round of talks to take place in September, but the fear is that they will soon break down, as they have in the past. More troublesome, is a feeling by many, on both sides of the "Green Line," that time for accommodation is running out.

Both sides have made rapid adjustments to their separation and are learning to live without each other, not just politically and physically, but more importantly, economically.

The Greek Cypriots are having something like a minor economic boom, having reoriented their businesses to the Middle East and quickly rebuilding a tourist industry on their southern shores. The Turks, while more depressed and dependent on help from mainland Turkey, are also seeing small signs of life in their economy.

"It would be a terrible shame if these talks fail again," said Greek Cyriot Foreign Minister Nikos Rolandis in an interview. "Each failure brings us closer to a situation no one really wants."

"The longer we fail to find a solution, the harder it becomes," Rolandis said. "My generation still knows the Turks, and Denktash's knows the Greeks. We have friends on both sides, and therefore have some understanding of each other. My children have much less and their children will have none.There will be no contact between them, and if the solution lasts into their generation, the separation of our communities, our histories, could be permanent."

Avoiding this compromise, on both sides, is clearly essential. But for all the seeming concern expressed in private, the public positions today remain frozen, as Kyprianou's sudden backtracking last week demonstrated.

"I don't think these talks are ready to go anywhere," said one NATO diplomat. "I still don't see any sign of compromise."