Yugoslavia Struggles Over Confederation Prospects : Independence: The nation could embrace three states.

Matjaz Sinkovec concedes that it is going to take some getting used to--the idea that he would have to show his passport to get to his family’s summer home on the Adriatic Sea in neighboring Croatia.

International borders lacing Yugoslavia will be one of the numerous changes necessary to create a confederation along the lines sought by the self-styled sovereign state of Slovenia.

Hundreds of thousands of Yugoslavs have second homes on the Adriatic coast in Croatia, and under the Slovenian proposal for confederation, this would make the resort strip part of a new and independent country.

Only Slovenia has outlined plans for independence, but Sinkovec and other officials said Croatia has indicated that it, too, is preparing to pull out of the federation.

Serbia, which has traditionally dominated the rest of the country, would likely form a third state with Montenegro, Macedonia and Bosnia-Hercegovina in the confederation conceived by Slovenia.

A tiny, mountainous republic of 2 million people bordering Italy, Austria and Hungary, Slovenia wants no federal government or capital in Belgrade, and no federal Parliament.

Instead, an administrative council to deal with matters of common interest would meet periodically, rotating among the member capitals--Ljubljana, Zagreb and Belgrade.

Slovenes believe that the workload of the confederation would be drastically reduced in comparison with the present federal government’s. All matters of foreign and domestic policy would be handled by the individual states.

Taxes that are collected and spent by the federal government would be repealed and replaced by sales and property taxes in each of the three states. Air transport could continue to be coordinated by the JAT network, along the lines of Scandinavia’s SAS airline. Slovenia already has its own airline, Adria Airways, which could negotiate landing rights with the others.

One of the thornier issues facing the confederation would be defense. Yugoslavia’s army would have to be broken up into territorial forces loyal to the individual states, Slovenia insists. But Yugoslavia also has a navy and air force, and it would be impossible to split these up; as joint forces, they would be unmanageable under the command of three different presidents.

Slovenia’s declaration of sovereignty brushes over this potential conflict with assurances that Europe is at the dawn of a new, demilitarized age. Political leaders have been assuring the public that weapons and attack forces are out of step with the times.

Once Slovenia’s independence is officially established with the adoption of a constitution, expected early next year, the offices currently used for trade and cultural contacts would be converted to embassies and consulates.

Repayment of Yugoslavia’s $16-billion foreign debt is a matter of prime concern for creditor foreign banks and governments. Slovenia insists that it will pay its share.

With its July 2 declaration of sovereignty, Slovenia has issued an ultimatum that will force the other republics into a dialogue on confederation. But the rebellious republic has made it clear that failing agreement on a new, much looser alliance, it will secede and end all association with what is now known as Yugoslavia.

Details of how the confederation would be established and operated are sketchy, as Serbia has not agreed to negotiations. Prime Minister Ante Markovic continues to seek a solution that would preserve a central Yugoslav government.

Serbia has rejected confederate status, saying it would choose independence if Yugoslavia breaks up into the separate states that existed before 1918, and this may result in giving Slovenia the free statehood it prefers.