WITHDRAWAL WINDS DOWN IN BOSNIA\Both sides await return of POWs.

Byline: Chris Hedges The New York Times

Bosnian Serb and Bosnian government forces completed the pullback of most of their troops and heavy weapons from confrontation lines Friday in compliance with one of the most significant deadlines set by the Dayton peace agreement, but failed to honor another commitment signed at Dayton to release all prisoners of war.

"The parties have demonstrated compliance with the cessation of hostilities agreement, and they have refrained from offensive actions," Javier Solana, the secretary-general for NATO in Brussels, said in a generally upbeat appraisal of the Bosnia mission so far.

Little more than a month after the peace agreement was signed in Paris, the most daunting goals remained ahead: the restoration of homes to two million displaced people, the establishment of the rule of law, the rebuilding of a shattered country, and the strengthening of a peace that might outlast NATO's departure. The failure to release the prisoners generally was portrayed as a temporary setback, as each side used this human leverage to dramatize its mistrust of the others.

Bosnian government officials, demanding information about the fate of thousands of Muslims missing in Serb-held Bosnia, refused to release all Serbian prisoners as called for by the agreement.

The number of prisoners released at the Sarajevo airport Friday totaled 225, with roughly equal numbers exchanged by each side. The exchange still left some 700 prisoners of war in detention, about half on each side.

The International Committee for the Red Cross, the organization named by the Dayton agreement to oversee the release, said the refusal to release the remaining 700 prisoners put both parties in violation of the Dayton agreement.

"No one here is in the spirit of the peace agreement," Christophe Girod, an International Red Cross official, said on a darkened corner of the airport waiting for the exchange.

But the NATO commanders, who inspected various sites along the 1,000-mile-long cease-fire line, cooed with satisfaction Friday.

They lauded the formal establishment of the two-mile separation zone, put in place over the past few weeks, as a milestone in the attempt to establish a permanent peace in Bosnia after nearly four years of fighting. And NATO commanders said it signaled the authority of the NATO-led force that began to deploy in Bosnia in December after the signing of the peace agreement in Paris.

Lt. Gen. Sir Michael Walker, who commands NATO ground troops in Sarajevo, walked up a hill on the outskirts of the city to what was once one of the fiercest confrontation lines of the war, the Jewish cemetery.

"What you see here is a microcosm of what is going on all across the confrontation line," the British general said, standing near Bosnian Serb and government trenches that snaked to within yards of each other. "We won't know if it's been a complete success for a while now. But by and large our forces throughout the country are having the same success we are having here."

Bosnian government troops, who watched, bemused, as the general shook hands and moved about the hill with his entourage, nevertheless seemed to welcome the event.

"We stopped because of Dayton," said Strik Sabahudin, 32, a soldier who helped man the trenches around the cemetery until a few days ago. "America, France, England and all the West signed it. I guess we can abide by it. Four years is enough war for anyone."

The signs of peace, at least for now, were evident in many spots along the former front lines.

The Serb-held town of Trnovo is a strategic hamlet 10 miles south of Sarajevo that changed hands three times and was one of the main objectives in the final Bosnian government offensive last fall.

On a hill above the town, Capt. Antoine De La Rochebrochard of France stood next to the smashed remains of the small Treskavica Hotel. Near the door lay a pile of old, black army boots. All the windows were gone, and the interior was wrecked by gaping holes, burst water pipes and shattered concrete. The town, whose gutted houses and debris-strewn streets were still, testified to the effectiveness of the military withdrawal, however.

"The Serbs pulled out of here a week ago," the captain said. "It was all quite easy. The Serbian commanders seem to have been given the order to leave, and they left."

On the front line between Sarajevo and Serb-held Vogosca, a handful of Italian troops with the NATO force spent the afternoon putting touch-up paint on their vehicles.

The Bosnian troops, the Italians said, pulled out about two weeks ago. The area was covered with coils of barbed wire and barricades that troops of the NATO force, known as IFOR, said they would demolish.

"You won't see anything for as far as the eye can see," Hilmo Suljevic, 27, a Bosnian government military policeman, said at his post two miles away.

"We cleared out all our men and armor weeks ago. Everyone was sick of life in the trenches, sick of the weapons. We were glad to move them."

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PHOTO

Photo (1--color) Freed Bosnian prisoner Ramiz Dedic is embraced by a relative as he arrives in Sarajevo on Friday. (2) A van carries furniture through a village six miles north of Tuzla on Friday as Muslims return to homes abandoned during earlier fighting. Associated Press