The blast scene

Bomb Hits Bosnian Town

The device had been placed beneath a caravan near Banja Luka's rail and bus stations and went off when its owners tried to move the vehicle.

Police said they believed it consisted of a hand grenade together with plastic explosives. The two people seriously hurt are undergoing emergency treatment.

Earlier in the day, NATO troops stepped up security patrols and allowed Bosnian Serb military police, acting on a tip-off that an extremist group might try to infiltrate Banja Luka, to deploy armoured vehicles near the presidential palace. However it is not yet clear if the blast had a political motive.

Elsewhere in Bosnia the northeastern town of Brcko was calm following the attacks by local people on American NATO troops early on Thursday morning. NATO has become increasingly tough in its reaction to violence and has warned that it will use military force to close down local broadcasters if they incite violence against the stabilisation force. The troops have also begun pulling back some of the barricades set up to protect them from angry crowds.

During the attack 40 policeman from the United Nations International Police Task Force in Brcko were evacuated by troops from the NATO-led Stabilisation Force (SFOR). Three officers were lightly injured when the main UN police station in Brcko came under attack. One team of police officers later went back to assess whether it was safe for their colleagues to return to Brcko.

UN spokesman Liam MacDowall, speaking in Sarajevo, said he was concerned that the rioters "were congratulated for such behaviour". He was referring to remarks made by the Serb representative on the Bosnian collective presidency, Momcilo Krajisnik, who told the people of Brcko: "I hope you would repeat the same feat a hundred times over if we are in jeapordy, because we have the right to defend ourselves."

Mr Krajisnik is the main ally of Radovan Karadzic, the former Bosnian Serb leader and indicted war criminal.

The clashes in Brcko were the result of SFOR's attempt to support police officers loyal to President Plavsic in their attempt to take the Brcko police station from officers supporting Mr Karadzic.

In Washington, White House spokesman Joe Lockhart said the Serb leadership was responsible for "keeping their people under control". Mr Lockhart added that the US would not tolerate anyone "inciting people" against SFOR troops.

In Brussels, the European Union expressed outrage over the attacks in Brcko. A statement from the EU Presidency declared: "The authors of this provocation must be confronted with their responsibilities."

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