ALBANIAN REBELS GEAR UP FOR BATTLE : GOVERNMENT LOSES LAST SOUTHERN OUTPOST AS SOLDIERS FLEE INTO HILLS.

Byline: Jane Perlez The New York Times

Insurgent leaders in this tough port town that is at the heart of the rebellion in southern Albania started organizing Saturday for a battle against the government, saying that they did not want to fight but were getting ready to defend themselves.

The unpopular Albanian president, Sali Berisha, lost more ground Saturday when his last remaining outpost in the south, the historic town of Gjirokaster, 20 miles from the Greek border, fell to local residents who stormed the army base and seized the weapons there.

An effort by Berisha's demoralized and miserably paid army of 30,000 to send in reinforcements by helicopter failed when the soldiers fled into the hills after being confronted by armed and angry residents.

All across the south the rebels ignored a 48-hour amnesty period during which they had been urged to surrender their weapons. As rumors swept through Vlore that the army had killed five rebels in the surrounding hills, toughs strutting with Kalishnikov rifles took control of the center of town.

The two-day cooling off period, which was supposed to include the suspension of military operations by the government, was not observed by Berisha's side either.

In what seemed like a comic scene out of ``Sergeant Bilko,'' two army tanks in the hills behind Vlore tried to move in further but almost piled into each other as they maneuvered the narrow dirt road.

One of the drivers, who had been chatting with local villagers, left his earmuffs behind on the roof of a parked car and raced back to get them as his tank was moving off. Several of the soldiers on board were dressed in jeans and tatty jackets rather than uniforms.

Militancy rose during the day in Vlore, where townspeople are proud of easily repulsing the Italians in 1920 and of contributing to the partisan cause in World War II.

About 2,000 people who gathered in the town square Saturday morning were urged by the newly constituted Committee for the Protection of Vlore to hold on to the weapons they had taken from deserting troops.

``The ultimatum of Berisha ends in 20 hours,'' said Luftar Petroshati, 62, who was an officer in the Communist army under President Envers Hoxha and a partisan in World War II. ``Let's use the 20 hours to better defend ourselves, our streets, our houses.''

At rallies Friday night and again this morning, some men wore pistols under their jackets. But there was relative calm in the town of 100,000, punctured by the occasional pop of rifles and machine-gun and mortar fire. Army weapons depots and tunnels in the hillsides stuffed with government weapons were raided by angry residents the week before last.

The military arm of the citizens committee, consisting of army defectors and retired officers, met Saturday afternoon to plan the defense of Vlore. A rough rebel line has been drawn 20 miles to the east near the village of Povl and another 14 miles to the north, near Fier.