On the surface, the country’s haunted capital Sarajevo, its ancient mosques and Orthodox churches still pocked with holes from mortar fire, appears to be enjoying a renaissance. Young professionals throng to stylish cafés and gleaming new shopping centers while the muezzin heralds the morning prayer. The ghosts of Srebrenica linger – recalling the worst massacre in Europe since World War II – but Sarajevans prefer to talk about Barack Obama or the global financial crisis than about genocide.

Yet the aftermath of war is ever present. The Dayton accord divided Bosnia and Herzegovina, a former Yugoslav republic, into a Muslim-Croat federation and a Serb republic after a savage war from 1992 to 1995 in which about 100,000 people were killed, the majority of them Muslims. A million more Muslims, Serbs and Croats were driven from their homes, while much of this rugged country’s infrastructure was destroyed.

The peace agreement, brokered among the warring sides by the Clinton administration at a U.S. Air Force base in Ohio in November 1995, accomplished its goal of ending the war. But the decentralized political system it engineered has entrenched rather than overcome ethnic divisions. Even in communities where Serbs, Muslims and Croats live side by side, some send their children to the same school, but in different shifts.

Bosnia, which has received more than €14 billion, or $18 billion, in foreign aid since 1995, remains an adopted orphan of the West, its security guaranteed by 2,000 European Union peacekeepers. Locked in an impasse of mutual recrimination are Haris Silajdzic – the Muslim in the country’s three-member presidency, who has called for the Serb republic, Republika Srpksa, to be abolished – and the Bosnian Serb prime minister, Milorad Dodik, who has the support of Moscow and who has dangled the threat that of secession.

“It’s time to pay attention to Bosnia again, if we don’t want things to get nasty very quickly,” Richard Holbrooke, the Clinton official who brokered the Dayton accord, and Paddy Ashdown, formerly the West’s top diplomat in Bosnia, warned recently in a commentary in The Washington Post. “By now, the entire world knows the price of that.”

Sketching a worst-case scenario, Srecko Latal, a Bosnia specialist at the Balkan Investigative Reporting Network in Sarajevo, warned that if the Serb republic declared independence, Croatia would respond by sending in troops, while the Bosnia Muslims would take up arms. If Banja Luka, the capital of the Serb republic, were to fall, he continued, Belgrade would be provoked into entering the fray, leading to the prospect of a regional war.

“For the first time in years, people are talking about war,” Latal said. “They are tired of it, and they don’t want it. But it is not beyond the realm of possibility.”

Leaders across the ethnic divide expressed hope that Obama, the U.S. president-elect, would be more engaged in Bosnia than President George W. Bush was, while stressing that Obama’s multicultural background made him ideally suited to mediate here.

Many here are also optimistic that Hillary Rodham Clinton, the probable next U.S. secretary of state, will have a vested interest in salvaging Dayton as part of President Bill Clinton’s legacy.

“The Bush administration has been disengaged for years and has adopted an anything-but-Clinton approach to Bosnia,” said Elvir Camdzic, a foreign policy adviser to Silajdzic, the Muslim leader. “We all welcome the election of Obama, because if anyone can understand what it takes to put Bosnia back together again it will be him, while Hillary Clinton will recall better than most that the international community bears some responsibility for what happened here because it intervened too late.”

Beyond deeper U.S. engagement, the best chance for stability is joining the EU, the world’s biggest trading bloc. Progress has not been encouraging. In a damning report assessing Bosnia’s readiness to join the union, the European Commission, the EU’s executive body, warned in November that “inflammatory rhetoric has adversely affected the functioning of institutions and slowed down reform” while corruption and organized crime were significant.

The world is so concerned about Bosnia’s stability that the United Nations Security Council has extended until June the mandate of its senior envoy to Bosnia.

Miroslav Lajcak, a young Slovak diplomat widely viewed as deft, is the UN’s high representative and the EU’s main envoy. He said in an interview that while the situation was critical, it was a sign of progress in Bosnia that politics now trump security as the biggest challenge.

“The political situation is difficult, volatile and unstable, but it is not undermining security,” he said. “Violence can’t be ruled out, but I don’t see the prospect of another war.”

For the country to progress, leaders on all sides say, the structure established by the Dayton accord direly needs an overhaul. The country’s two entities have their own legislatures, and there are 10 regional authorities, each with their own police forces and education, health and judicial authorities.

The result is a byzantine system of government presided over by 160 ministers, 14 prime ministers and 9 presidents, a structure that absorbs 50 percent of Bosnia’s gross domestic product, according to the World Bank.

Historically, Bosnia always needed a complex system of local government – and graft – to hold together its disparate regions and groups. In 1987, as the old Yugoslav federation began to crumble, the first case of mass Communist corruption was exposed in Bosnia – the republic that most needed the old multiethnic country in order to survive itself.

Today, Bosnia’s political leaders have seemingly irreconcilable visions of the country’s future direction.

Silajdzic, who as Bosnia’s wartime foreign minister was at Dayton, said in an interview that the institutional structure created there had served to legitimize the genocidal policy of the Serbs. He urged the world to help write a new constitution that would create a unified state based on economic regions, effectively consigning the Serb republic to the dustbin.

“The problem with Dayton is that it created an ethnocracy rather than a democracy and has become an umbrella under which Slobodan Milosevic’s project of ethnic cleansing is hidden,” Silajdzic said, referring to the former Serbian president. “If the situation is allowed to continue, the message this sends the world is, ‘Kill thy neighbor and get away with it.”‘

For Dodik, the prime minister, such rhetoric just goes to prove that Bosnia’s Muslim leadership is intent on domination. “If Siladzic doesn’t like Dayton, then why did he sign it?” he asked.

Dodik, a charismatic former basketball player with a large power base in the Serb republic, was once a Western darling for his wartime and postwar opposition to Radovan Karadzic, the Bosnian Serb nationalist leader now on trial in The Hague on war crime charges. But many Western diplomats say he has since adopted Karadzic’s rhetoric and blame him for impeding progress in Bosnia.

Dodik recently further inflamed tensions by filing criminal charges against a senior U.S. envoy and foreign prosecutors in Bosnia, accusing them of plotting against his government after they opened a corruption investigation into the Serb republic’s infrastructure deals, including the €110 million government building in Banja Luka.

“We are tried of being treated like a banana republic,” Dodik said.

In recent months, guessing whether Dodik will tear the country apart has become a favorite parlor game in Bosnia. But the prime minister insisted in an interview that secession was not on his agenda.

“I have said many times that my aim is not secession, and we have not taken a single step toward that,” Dodik said. “What has been said is a fabrication.”

Most Serbian analysts agree that secession would be tantamount to political suicide. Beyond the obvious threat of provoking a war, aligning the Serb republic with Serbia would subsume Dodik’s power and lead to further isolation internationally.

In the former Yugoslavia, the lives of Serbs, Croats and Muslims were closely entwined for 45 years, with intermarriage not uncommon in larger cities like Sarajevo. But Dodik said the dissolution of the old state and the war that followed had destroyed whatever optimism he once had about different ethnic groups collectively deciding one another’s fates.

“Bosnia is a divided country,” he said. “There is not a single event or holiday, except for New Year’s or the First of May, that we celebrate together. I have lost all of my illusions.”