The emergency occurred in Pancevo, an industrial town of around 100,000 inhabitants only about a 20-minute drive from the centre of the Serbian capital Belgrade.

It prompted local authorities to take the unprecedented step of sounding sirens because of an environmental problem, which wailed for several hours overnight between Tuesday and Wednesday.

After a sleepless night behind tightly shut windows, many residents emerged Wednesday to say they thought the alarms had been sounded because of something more sinister.

Some said they even thought Pancevo had again come under attack, as it had seven years earlier during 11 weeks of NATO air raids on targets in their hometown over the Kosovo conflict.

Zoran Stanizan, a local journalist and environmental activist, said at the height of the alert, Pancevo had been shrouded by a thick, red haze of poisonous industrial emissions.

He said the incident revealed only part of a long-standing problem, as the facilities had belched smoke over the town for decades, notably from an oil refinery, fertiliser plant and plastics factory.

"Pollution is always present in Pancevo, but its level depends on meteorology conditions," Stanizan told AFP.

"Last night, the town was literally empty, the streets almost covered with thick dark red clouds -- it was like a catastrophe," he added.

The Serbian government later confirmed the Petrohemija oil refinery was the alleged culprit, and announced it was pressing charges against the state-run company's top management.

During the alert, the concentrations of benzene and sulphur were at least five times over the safety limit, authorities said, leading to their decision to sound the sirens and warn people to remain indoors.

Despite a production halt at Petrohemija on Wednesday, a pale-red mist still hung above the city, some 15 kilometres (10 miles) northeast of Belgrade.

Pungent sulphur could still be detected in various parts of the town and was expected to remain for days together with a "metallic" smell, as a clear sign of lasting pollution, residents warned.

Activists said that having battled for years to get the suspected contaminators removed from the area, they now had a sense of helplessness.

The issue, they said, was beyond the capabilities of local authorities.

"We feel that we have been constantly sacrificed, since the pollution problem has been present in our town for a long time, but the state, although aware, has done nothing to improve the situation," said Stanizan.

He added the main cause for such high pollution levels was the worn and aged equipment used in the petrochemical complex, which has not been modernised since its opening some 30 years ago.

Pancevo's industrial sector is a key contributor to the Serbian government's coffers.

The refinery, which is Serbia's second biggest, as well as the fertiliser plant and plastics factory account for a third of the national budget, according to officials.

Local authorities say they want to help, but insist they don't have enough power to resolve the problem.

Speaking to a group of high-school student protestors gathered in front of the local council, Mayor Srdjan Mikovic called on the federal government to provide financial assistance in order to improve Pancevo's ecological crisis.

"If the government does not come here, we will go together to see them. This is not a political question, but one of survival," Mikovic told the protestors.

Stanizan backed up his statement, saying the Serbian government "does not want to invest as the complex is to be privatised" soon.

"That is why they prefer to leave the modernisation up to new owners," said Stanizan.

Marija Ristic, a 35-year-old medical worker, warned that unless the issue is soon resolved, residents might be forced to take matters into their own hands.

"I'm afraid the only solution will be to block the factories since other measures we have used to express our dissatisfaction have proved useless," she said.