BELGRADE (Reuters) - U.S. envoy Richard Holbrooke began a decisive round of Kosovo talks with Yugoslav President Slobodan Milosevic on Wednesday as the West piled pressure on Belgrade to expect NATO air strikes if mediation fails. The intensification of NATO threats and the frustration of U.S. mediators who admitted they were making no headway with Milosevic created a volatile psychosis of fear among ordinary Serbs in contrast with their government`s outward calm. Milosevic and the Yugoslav army have warned the West that Yugoslavia is ready to defend itself if attacked by NATO in defiance of Russian opposition. Belgrade was rife with speculation that air strikes were inevitable and that air defences had been readied to try to counter a barrage of U.S. missiles. Many people feared NATO would hit urban targets, causing civilian casualties whether by accident or design, although any attacks were to be directed against military installations. Britain and France advised their nationals to leave Yugoslavia and NATO Secretary General Javier Solana told the French newspaper Le Monde "the countdown (towards intervention) has started". Holbrooke was expected to travel to Brussels later to meet Solana and U.S. Secretary of State Madeleine Albright. Their talks would be a crucial preamble to a session on Thursday of the Big Power Contact Group which co-ordinates international mediation in the Kosvo crisis. The meeting of the United States, Russia, Britain, France, Germany and Italy would try to overcome Moscow`s opposition to NATO action without U.N. approval. Holbrooke has met Milosevic twice this week without persuading him to meet U.N. and NATO demands for "irreversible and verifiable" efforts to end seven months of bloody conflict with the separatist ethnic Albanian majority in Kosovo. The ethnic Albanians, who make of 90 percent of Kosovo`s 1.8 million population, are insisting on full independence for the province. Milosevic has offered only to discuss autonomy, which is also the solution favoured by the West. U.S. President Bill Clinton said NATO was prepared to act unless Milosevic ended the offensive against the Albanians. Holbrooke also met Kosovo Albanian leader Ibrahim Rugova in Pristina, but neither side would comment on the talks. Between 800 and 1,500 people are estimated to have died in fighting since March between Serb security forces and separatist guerrillas of the Kosovo Liberation Army (KLA). The U.N. refugee agency said on Tuesday about 50,000 Kosovo Albanians had returned home but insisted a big Serbian police presence was preventing thousands more from going back. Pristina-based U.N. High Commissioner for Refugees (UNHCR) official Fernando del Mundo said on Tuesday a relatively calm week in Kosovo encouraged people to return to their villages and cited as an example the Glogovac area in central Kosovo.