May 18, 2006 10:54 AM

CETINJE, Serbia-Montenegro-Red Montenegrin flags with golden eagles - the symbol of the Balkan republic's statehood, flutter in every corner of this ancient city. Here, there is no dilemma about the upcoming independence referendum.

"We are all for independence," says Vesna Berkuljan, a 43-year-old museum guide in Cetinje, Montenegro's historic capital. "We always have been."

Montenegro's nearly half a million voters decide on Sunday whether their tiny state of some 620,000 people will become an independent state or remain in a union with the much larger Serbia.

Montenegrins are split down the middle between those who believe that a union with Serbia is in Montenegro's national interest and those who think their republic is much better off on its own.

In Cetinje, which served as the capital of Montenegro while it was an independent state in the late 19th and early 20th centuries, Sunday's vote means much more, averting what they see as an historic injustice.

"It is time that Montenegro's statehood is recognized," says Maja Latinovic, 30, a housewife from Cetinje. "We do not need Serbia."

Such a mood is felt overwhelmingly here, the ancient seat of Montenegro's last king, Nikola Petrovic. King Nikola's former palace still stands, as do the town's fortress, the main monastery and a tiny, 15th century church, which throughout history was repeatedly destroyed by conquerors, and rebuilt by Cetinje's proud residents.

The church which serves as the tomb for the late king and his wife, Milena.

The couple reigned from 1878 until 1916, when they fled advancing Austro-Hungarian troops. They had 11 children, a fact which has turned the church with their tombs into one of the favorite wedding venues in Montenegro.

Nearby, a stroll along Cetinje's main street testifies to the town's former glory, when the capital hosted foreign diplomatic missions of the leading world powers, including the United States, France, Britain, Germany or Russia.

Today, the former embassies mostly serve as museums, libraries or residential houses. The former American consulate, however, was damaged in a devastating earthquake in 1979 and demolished shortly after.

"The others were renovated, but the American embassy was too badly damaged to be repaired," explains Natasa Markovic, from Cetinje's historic museum.

Markovic and other residents of Cetinje take pride in their country's lost statehood, largely blaming Serbia and the world powers for the decision to join Montenegro into the newly-formed Kingdom of Serbs, Croats and Slovenes in 1918.

Back then, the move led to the abolishment of the Montenegrin kingdom, triggering a brief mutiny by opponents of the joint state, which was brutally put down by the new authorities. King Nikola remained in exile until he died in Italy in 1921. The late king's remains were brought back to Montenegro in 1989.

"We had our king and our state," Latinovic says. "I really don't know why we gave that up."

For decades, Montenegro remained in the Balkan union, even as it began disintegrating in a series of bloody conflicts in the early 1990s. But, over the years, relations with the last remaining partner, Serbia, have worsened, fueling Montenegro's lingering pro-independence drive.

Today, the pro-independence bloc enjoys the support of many prominent Montenegrins, but also of King Nikola's only known heir, Prince Nikola, who lives in France, but who has come to his native Montenegro for the referendum.

"On Sunday, a simple drop of a ballot will erase an historic Montenegrin mistake," he said. He also called for restoration of the rights of the royal family, but not the throne.

Milo Djukanovic, Montenegro's Prime Minister and the leader of the pro-independence bloc sends a similar message:

"History has chosen us to fulfill this historic task," Djukanovic says. "It is up to us to restore Montenegro's statehood."