ZAGREB, Croatia (AP) _ The federation that Bosnian Croats and Muslims formed six months ago is threatening to collapse, which could leave the two groups fighting each other as well as the Bosnian Serbs.

The presidents of Bosnia-Herzegovina and Croatia met Tuesday to attempt to breathe life into the feeble federation.

As the meeting convened in the Croatian capital, fighting raged 60 miles to the south in Bosnia's northwest corner. Bosnian government radio reported that its forces killed 60 Serb troops as they rolled back a Serb offensive.

The report said Lt. Gen. Ratko Mladic, the Bosnian Serb commander-in-chief, was wounded in the fighting, but gave no details. There was no independent confirmation.

The federation, brokered in February by the United States, was meant to unite Bosnia's Croats and Muslims, bridge deep enmity left by more than a year of fighting and permit the two groups to reform an alliance against Bosnian Serbs.

But mistrust lingers, and the alliance has yet to resolve differences on government structure, military strategy, the economy or the repatriation of hundreds of thousands of refugees.

After their talks Tuesday, presidents Alia Izetbegovic of Bosnia and Franjo Tudjman of Croatia expressed optimism and said they would meet again on Wednesday.

With the Serbs the common enemy of Croatia, their Bosnian Croat proxies and Bosnian Muslims, stakes at the meeting were high.

The United States is considering exempting Bosnian troops from a U.N. arms embargo imposed on all factions in Yugoslavia and its former republics if Bosnian Serbs continue to boycott an international peace plan.

But federation President Kresimir Zubak, a Bosnian Croat, said in an interview Monday that the United States would move to lift the arms embargo only for the federation as a whole, and only if it were functioning.

''If our international sponsor, the U.S., realizes that the project of the federation has failed, the lifting of the arms embargo will not take place,'' he told The Associated Press.

A joint command is being formed for Muslim-dominated Bosnian government troops and Bosnian Croat forces, but the two armies remain separate and often distrustful. Some Muslims fear that the Croats will fight only Serbs over traditionally Croat territory and not for the federation as a whole.

In Bosnia's northwestern Bihac pocket south of Zagreb, the Bosnian government evacuated civilians from a front-line town in northwestern Bosnia facing a sustained offensive by Serb insurgents.

U.N. spokesman Maj. Dacre Holloway said government defense lines around the town of Otoka were holding, ''but we don't know how long it will stay that way.''

Bosnian Serbs ''have been attacking for quite some time,'' he said.

In a later report, Bosnian radio said the Serbs were pushed back. Beside the 60 reported Serbs killed, 180 were wounded and large amounts of ammunition were captured, said the unconfirmed report.

Otoka is on the edge of what is known as the Bihac pocket, an area of Bosnian government-controlled territory in the extreme northwest corner of Bosnia. It is surrounded by territory under the control of Croatian and Bosnian Serbs.

The war in Bosnia began in April 1992 when Serbs rebelled against a vote by Croats and Muslims to leave Serb-led Yugoslavia. An estimated 200,000 people are dead or missing, and Serbs control about 70 percent of the republic.