CAMPO DEL CAPITANO, Yugoslavia (AP) _ Croatian farmer Olivio Arland is confident that European Community recognition of Croatian independence will mark the beginning of the end of nearly seven months of war.

And peace would mean a return to pragmatic concerns - Arland hopes to double his stock of two cows, two horses and three little pigs.

''I used to have twice that many but I had to sell them (during the war) ... now I'm going to start rebuilding all that,'' said the ruddy, 39-year-old farmer, interviewed in this hamlet near the warfront in central Croatia.

Because the fighting disrupted transport across Yugoslavia, Arland said he lost half his crops of potatoes, corn and cabbage.

Fighting broke out after Croatia declared independence on June 25. Last month, the European Community, spurred by Germany, said it would today recognize any of the six Yugoslav republics that apply for membership and adhere to democratic and human rights guidelines.

Recognition would put tremendous public pressure on Serbia, which the EC has labeled the aggressor in the conflict, to stop its military campaign in Croatia.

An advance group of 50 U.N. military observers arrived in Croatia and Serbia on Tuesday.

If a nearly two-week-old truce holds, the United Nations could send thousands of blue-helmeted peacekeepers to separate the warring parties.

''We live on hope,'' Arland said, a melodious Latin lilt punctuating his Croatian. ''I believe this won't last too much longer.''

But in nearby Pakrac, where Croat and Serb lines are separated by 100 yards of no-man's land, Croats were not so sure of the dividends recognition and U.N. peacekeepers would bring.

''Recognition will certainly help morally and also materially,'' said Sgt. Ivan Lakic, lunching in the eerie truce silence on a can of corned beef.

''I'm afraid the other side won't accept the blue helmets ... but they (Serbian forces) will have to leave peacefully or by force.''

''They know the blue helmets will come, but basically ... (the Serbs) only recognize their own power,'' agreed Radovan Stjepanovic, another Croatian soldier.

Many Serb villages around Pakrac, a regional center, have been razed to charred ruins. Arland said that was in retaliation for earlier attacks on Croat and other villages.