ROME (AP) _ The United States and its allies crafted a mix of incentives and penalties Wednesday to stop Yugoslavia's military crackdown in its mainly Albanian province of Kosovo.

The so-called Contact Group of nations monitoring Yugoslavia is struggling to deal with escalating violence in the southern province, which threatens to spill over into neighboring Albania. They also fear Greece and Turkey could be drawn into the fighting.

Italian diplomats said the talks focused how to start a concrete dialogue between Albanian separatists and officials in Belgrade, the Yugoslav capital, and how to keep the violence from spreading to Albania.

Representatives from Britain, France, Germany, Italy, Russia and the United States worked into the evening to come up with a statement.

A potential sanction would be a stepped-up freeze on foreign investment in Yugoslavia, whose economy already is seriously suffering. Other potential punishments include a hold on Yugoslav assets abroad and a trade ban.

The United States has said it was ready to adopt unspecified measures on its own if the group cannot agree on tougher sanctions.

On the other hand, the group is holding out the incentive of moving to end Yugoslavia's international isolation if it responds favorably.

About 150 people have been killed in Kosovo since Feb. 28, when Serb security forces a crackdown on ethnic Albanian separatists. Serbia is the dominant of two republics remaining in Yugoslavia.

On Wednesday, shots rang out at the funeral for three ethnic Albanians killed this week. The origin of the shooting in Priljep was unclear, but Yugoslav troops and Kosovo militants both were present. No injuries were reported.

Later, one ethnic Albanian was shot and killed and five were wounded as they returned to a nearby village from the funeral, according to ethnic Albanians and the Kosovo Information Center, which releases information for the main ethnic Albanian party.

Kosovo, which Serbs consider vital to their identity as a people, has a population of 2 million, 90 percent being ethnic Albanians.

Albania says the crackdown has intensified nationalist fervor and raised tensions in the region. Its prime minister, Fatos Nano, said Wednesday that a NATO presence in Albania would help contain the conflict.

Nano, however, admitted that the provocations had gone both ways _ with incursions from the Serbian side into Albania, and vice versa.

Outside the meeting, 400 Albanian protesters chanted and carried placards reading ``Stop the Serb Butchers'' and ``USA, NATO in Kosovo.''

``We want the Contact Group here to stop the massacre in our country and to intervene urgently,'' said Xhafer Berisha, an Albanian from Kosovo.