By Igor Ilic and Matt Robinson

ZAGREB/NASICE, Croatia (Reuters) - An international exhibition about Anne Frank had already toured over 20 schools across Croatia when it ran into trouble last month in the coastal city of Sibenik, spotlighting the nation's struggle to resolve its dark World War Two past.

The story of the Holocaust diarist and her death at age 15 in a German concentration camp had been well received in a country that during the war was run by a Nazi puppet regime.

So the exhibition coordinator, Maja Nenadovic, was "flabbergasted" when the headmaster of Sibenik's Technical School decided to remove six of the exhibition panels that focused on Croatia's former fascist Ustashe era.

"He basically had a problem with the Ustashe being painted negatively," said Nenadovic. "It kind of left me speechless."

Historians say the Ustashe systematically persecuted and murdered Jews, Serbs and Roma. But the Sibenik headmaster objected that the six panels had nothing to do with Anne Frank and ignored killings of Croats by wartime anti-Nazi Partisans. 

The organizers packed up the entire installation and moved it out of Sibenik, which sits in an historically conservative of Croatia, to another school in the eastern town of Nasice.

The response of Croatia's conservative government was muted. It played down the matter, reflecting what critics say is a growing tolerance in the European Union's newest member state for those who would try to sanitize its World War Two record.

Concerns about the risks of revisionism have risen since the Croatian Democratic Union (HDZ), which led Croatia to independence from Yugoslavia through a 1991-95 war, took power again in 2015 on pledges to revive its flagging economy and promote conservative values based on family and faith.

Critics say the phenomenon is disturbing for hopes of lasting stability and development in the Balkan region, and reflective of a revival of nationalist sentiment across Europe.

"The HDZ is pursuing a two-faced policy," Ivo Josipovic, the Social Democratic president of Croatia from 2010 to 2015, told the Serbian daily Politika this month.

"When they speak in Israel or in European institutions, they are big anti-fascists. However, at home they turn a blind eye to 'Ustasha-philia', which is increasingly apparent."

Croatia has never fully confronted the crimes of the Ustashe fascists between 1941 and 1945, many historians say.

Many Croats, too, fought on the side of communist Partisans under Josip Broz Tito, who emerged victorious and brought Croatia into a Yugoslav federation that linked Serbs, Croats and Muslims under the mantra "Brotherhood and Unity". 

Fifty years later, mainly Catholic Croatia seceded from Serbian-dominated federal Yugoslavia in a war against Orthodox Croatian Serb rebels armed from Belgrade. At the time, Croatian nationalists began casting the Ustashe in a more favorable light as patriots and precursors of the modern Croatian state, a revisionist approach that continued after the war ended.

GHOSTS OF WWII PAST

Serbia, too, has flirted with rewriting history. In May 2015, a Belgrade court quashed the conviction of World War Two Serbian royalist commander Draza Mihailovic, almost 70 years after Partisans executed him for collaborating with the Nazis.

The ghost of Mihailovic's ultra-nationalist Chetnik fighters was revived by some Serb paramilitaries as they fought to carve out a Greater Serbia during Yugoslavia's bloody disintegration. One of the lawyers arguing Mihailovic's case was at the time an aide to current, nationalist Serbian President Tomislav Nikolic. 

In Croatia, the incident with the Anne Frank exhibition followed a dispute in December over a plaque placed near the site of the Ustashe concentration camp in the central town of Jasenovac, where a memorial center bears the names of more than 83,000 Serb, Jewish, Roma and anti-fascist Croat victims. 

The plaque, erected by a group of veterans of the 1991-95 war in remembrance of 11 fallen comrades, included the salute Za Dom - Spremni (For the Homeland - Ready), one that was used by the Ustashe and dusted off by Croatian nationalists in the 1990s as they fought to forge a new independent Croatia.

It can still be heard chanted from the stands of Croatian soccer stadiums.

Answering complaints about the plaque, Prime Minister Andrej Plenkovic called it a "delicate" issue and said he would form a commission to look at how the state should regulate all symbols and slogans of totalitarian regimes - fascist or communist.

"I want to firmly reject all insinuations about the 're-fascistisation' of the Croatian people. That's not the case," said Plenkovic. "This is about certain occurrences that do not represent a trend."

But the small Jewish community was outraged by what they saw as the government's inaction and boycotted the state event marking international Holocaust Remembrance Day on Jan. 27. 

Two days earlier, a municipal building in the capital Zagreb had hosted a roundtable discussion entitled Jasenovac-False Myth, at which participants disputed the death toll and whether it was really a concentration camp.

For decades Serbs and Croats have argued over how many people were really killed at Jasenovac.

"WE DON'T FALSIFY HISTORY"

Analysts said the HDZ reticence evinced a reluctance to alienate a vocal part of its support base.

Zarko Puhovski, a political philosophy professor in Zagreb, said that to change the atmosphere in Croatia, what was needed was a clear condemnation of crimes committed by communists and a greater awareness that the Ustashe "brought no good".

"When all that becomes part of public awareness, when the leftists also realize they must acknowledge communist crimes after World War Two, then we will have a situation that would allow for a rational discussion. I’m afraid we are still pretty far from that,” he said.

Moreover, he said, it is "tragicomic" that the prime minister had cast the dispute over the plaque as "delicate".

"It is anything but a delicate matter. We don't have people in the public sphere who are capable of responding radically to radical incidents."

In Sibenik, headmaster Josip Belamaric protested at the exhibition panels that examined the Ustashe regime, Jasenovac and the plight of Jewish children in 1941-45 Croatia, notably that of Lea Deutsch, a celebrated child actress in Zagreb who died aged 16 in a cattle wagon taking her to Auschwitz.

Such content was irrelevant to an exhibit about Anne Frank and the Holocaust, Belamaric told local news portal Sibenski List. Contacted by Reuters, he said: "I have no further comments to make as I did not throw anyone out of the school."

A Croatian government spokeswoman said Plenkovic had already spoken out on the issue of alleged revisionism and that "nothing new can be added at the moment".

The exhibition, created by the Anne Frank Museum in Amsterdam, has toured more than 40 countries worldwide. In each, it includes panels examining that country's own experience with the Holocaust, or more recent human rights issues. 

The fact that, before Sibenik, it had visited 23 Croatian schools without incident spoke to the readiness of students and their teachers to confront the Ustashe period, which otherwise receives only limited treatment in Croatian textbooks.

The six panels at issue were later installed in Sibenik's newly-opened anti-fascist museum and other parts of the exhibition appeared on billboards in the city, paid for by the newspaper Nacional in protest at the headmaster's stance. 

The Simon Wiesenthal Centre, the Holocaust research body, demanded authorities dismiss Belamaric. The center said that failing to do so "will indicate that Ustashe nostalgia is perfectly legitimate in today's Croatian school system".

In response, Croatian Education Minister Pavo Barisic said he would propose to both sides that they agree how to salvage the "essence" of the exhibition.

"We believe that students should be able to see it, and for it to be freed of all conflictual content," he was quoted as telling the state news agency HINA.

Nenadovic, the exhibition coordinator who is Croatian, said she was "horrified" by Barisic's statement.

"There is absolutely nothing contentious in our panels. We do not falsify history, nor do we deny it."

(Writing by Matt Robinson; editing by Mark Heinrich)