Zagreb (AFP) - The Nazi-hunting Simon Wiesenthal Center on Tuesday urged Croatia to stop paying pensions to people who served in the country's World War II Nazi-allied armed forces, labelling the policy an insult to their victims.

"In view of the horrendous war crimes committed in the so-called Independent State of Croatia (NDH)... such a policy is inherently mistaken," the centre's chief Nazi hunter Efraim Zuroff said in a letter to Prime Minister Zoran Milanovic.

Paying pensions to members of the WWII Ustasha armed forces is a "horrific insult to the victims, their families and all Croatians with a sense of morality and integrity," Zuroff stressed in a Wiesenthal Center statement quoting from his letter.

The Nazi-allied Ustasha authorities persecuted and killed hundreds of thousands of ethnic Serbs, Jews, Gypsies and anti-fascist Croatians.

Croatia is currently paying around 10,000 such pensions, to those still living or their spouses, which costs the European Union member around 50 million euros ($56 million) yearly, according to estimates.

Zuroff urged Milanovic to "take the appropriate measures to change this policy as quickly as possible and spare Croatia the shame of rewarding those who were among the worst and most cruel perpetrators of World War II crimes."

In 1993, two years after proclaiming independence from communist Yugoslavia, Croatia amended a law on pensions providing them also to members of the country's Nazi-allied armed forces.

Apart from receiving pensions, members of the so-called "homeland army" during WWII, as the law labelled them, were also entitled to special benefits, with each year spent in the armed forces or in detention after the war counting double when calculating their pensions.

The NDH Nazi puppet state was established in 1941 and lasted until 1945, when its forces were defeated by Josip Broz Tito's Allied-backed partisans.

The Simon Wiesenthal Center, headquartered in Los Angeles, hunts Nazi criminal throughout the world. It is named after the Holocaust survivor who was perhaps the best-known Nazi hunter until his death in 2005. Zuroff heads the centre's Israeli office.