BOMBARDED WITH media calls after removing the word "Christmas" from a festive arch at City Hall's holiday bazaar, the city's managing director struggled yesterday to avoid the role of Grinch.

"This is not about taking Christmas out of the holiday; this is about being more inclusive, in keeping with what this holiday is all about," Richard Negrin, told reporters.

It's the third straight year the city has permitted construction of a German-style Christmas market - a series of wooden booths from which ornaments, pastries, candy, trees, candles and other holiday fare are sold - on Dilworth Plaza, the government-owned property just west of City Hall. Some of the vendors are Jewish, others Muslim, Negrin said.

Until Monday, a festive arch welcomed visitors to "Christmas Village." But the word "Christmas" was removed from the arch after Negrin heard complaints from city employees and visitors, he said.

"Some folks were just offended by it," Negrin said. He described a young Jewish boy walking past the village with his father and asking, 'Dad, don't we get a village? Why don't we have one?' "

The organizer of the event, German American Marketing, announced yesterday that it would remove the arch entirely.

"The whole concept of Christmas markets in Germany is about joy, fun and entertainment and not a place for religious conflicts," said Thomas Bauer, president of the firm. " . . . We want to stress that the name was not intended to upset anyone."

The controversy got widespread national attention after a story in yesterday's Daily News hit the Internet and Negrin faced questions about political correctness.

"I think that's silly," Negrin said yesterday. "This is about common sense. Look, I'm a preacher's kid. I love Christmas. This isn't about political correctness or trying to say something negative about Christmas. This is about being more inclusive. That's what this holiday is about."

The city's official tree-lighting ceremony, originally scheduled for today, was postponed until tomorrow due to forecasts of heavy rain - giving city officials another 24 hours to decide whether to call it a "Christmas tree" or a "holiday tree."