ZAGREB, YUGOSLAVIA -- It used to be called the Square for the Victims of Fascism. Situated near the center of this handsome medieval city, it honored the tens of thousands of Serbs, Jews and Gypsies murdered during World War II by the Croat Ustashi regime, which collaborated with the Nazis.

The square's name, however, irritated Franjo Tudjman, the former Yugoslav army general, PhD historian and fervent Croat nationalist who was elected last spring as president of this Yugoslav republic of 4.6 million people.

"It was a kind of open admission of the supposed genocidal character of the Croatian people," Tudjman complained. So he changed it. It is now the Square of the Croatian Giants. And Tudjman says he is not concerned that the new name has rung alarm bells across a post-Communist country that is cracking along ethnic fault lines.

Angry Serbs, the largest and most voluble ethnic group in Yugoslavia, say the change is proof that Tudjman and his nationalist supporters are latter-day Ustashis. Jews complain it needlessly revives ugly memories. Many residents of Zagreb, the Croatian capital, say the name insults the tens of thousands of Croats who also were victims of fascism.

That the mere renaming of a city square could generate such heat is a portent of Yugoslavia's potential for ethnic chaos. Communism, although discredited and despised here, gave this nation of six republics and 10 nationalities a unifying principle. Democratic elections in the republics have highlighted the many reasons -- most of them ethnic -- why Yugoslavia, as a country, makes less and less sense.

In the past week, tensions here rose to the highest level since World War II after the central government in Belgrade ordered Croatia to dismantle its 15,000-member police reserve. Croatia refused, vowing to fight rather than give up. Before Tudjman backed down early Saturday, the Croatian police, on one side, and the Yugoslav army, on the other, had been ordered into the "highest degree of combat readiness."

Tudjman's government, which is strongly anti-Communist, has threatened secession unless Yugoslavia is reorganized as a loose confederation of six sovereign republics. The Yugoslav army is led by a Serbian-dominated officers corps that remains committed both to Communism and to a strong central government. The army, in a sense, has become an enforcer for the republic of Serbia, the largest of the six, where the leadership is committed to a strong, Communist-style centralism.

Serbia insists that it will allow the Yugoslav federation to be altered only if borders between the republics are changed so that all Serbs in the country can live within an enlarged Serbia. This demand, from the Croatian point of view, is a recipe for civil war, since about a half-million Serbs are scattered across Croatia.

The renaming of the Square for the Victims of Fascism fits in with a truculent pattern of behavior -- on the part of both the Croatian and Serbian governments -- that many observers here believe has sharply increased the possibility of violence.

Serbia has funded Serbian nationalists living in Croatia, and the Serbian press has carried wildly inaccurate stories about allegedly bloodthirsty Croatian police. Here in Croatia, Tudjman's government has countered with a series of decisions that, even to many Croats, smack of ethnic discrimination. The most symbolically charged issue has been the renaming of the square.

"Through this square, the government is showing its attitude toward minorities," said Hido Biscevic, editor-in-chief of Vjesnik, the main daily newspaper in Zagreb. "There are those who fear that we are going to get rid of Communism by going to Nazism."

There are countless examples of ethnic-based policies. For one, nearly all new police officers in the republic are Croats, and the government says it will sharply reduce the percentage of Serbs on the force.

And late last year, Tudjman's ruling party refused to accommodate Serbian demands for changes in the preamble to the republic's new constitution. As written, it said that Croats would grant equal rights to various ethnic groups, including Serbs. Ethnic Serbs in the Croatian parliament, however, insisted that the preamble should simply declare "all people are equal."

When the change was rejected by the Croat majority, Serbian members walked out of the chamber, and their departure is believed to be permanent. As part of the protest, the only ethnic Serb with a senior position in Tudjman's government resigned.

Asked about these matters in an interview, Tudjman raised his voice and attributed the complaints to "dogmatic and Communist conservatives" and "greater Serbian hegemony."

His government has become increasingly intolerant of criticism in the Zagreb media, especially television. It ordered the month-long suspension of Branka Sesto, a reporter with Zagreb Television, after she interviewed an artist who criticized Tudjman's plan to allow only Croatian art to be displayed in a museum that sits in the recently renamed square. The artist had asked, on camera, if the president of the republic should not have more important things to worry about than what is on display in a museum.

Over at the Square of the Croatian Giants, people continue to grumble.

"Getting rid of the Square for the Victims of Fascism implies that the Croatian people's main impression of themselves from the war is that they are fascists. This is an insult," said Vesna Pusic, a Croat and University of Zagreb sociology professor whose apartment looks out on the square.

Shortly after new nameplates for the square were put up in December, an anonymous dissenter used tape and professional lettering to cover part of one of them. Instead of reading "Square of the Croatian Giants," it read "Square of the Croatian Dwarfs." The tape survived just a few hours before police removed it.