Mediators negotiated furiouslywith the Bosnian government in Sarajevo today, struggling to patch together a peaceful resolution while the brutal war seemed to be ending as a resounding Serb victory. Diplomats pushed the existing peace plan, which would force the victors into retreat, although U.N. officials acknowledged that they had no leverage to make the Serbs comply. Meanwhile, Defense Secretary William Perry today suggested for the first time that one way out of the morass would be the formation of a "Greater Serbia" with ties between the Bosnian Serbs and Serbia -- a reversal of past initiatives that insisted on retaining Bosnia's sovereignty. There's no word yet on how that proposal played with the adversaries. Even as negotiations intensified, however, snipers continued to fire at Sarajevo and heavy shelling continued in the Bihac area. The Serbs, reports TIME reporter Angela Leuker, "have surrounded the town, but they are not going in" -- a strategy set up to give them diplomatic leverage by keeping thousands of refugees at their mercy.