Ian Gunn reports: The fledgling government faces significant challenges

Hundreds gathered to celebrate the creation of Nunavut, which represents a significant move towards self-government for the native Inuit people.

Nunavut -meaning "Our Land" in the Inuit language Inuktitut - covers an area the size of western Europe, but is home to only 25,000 people, of whom 85% are Inuit.

Fireworks heralded the birth of Nunavut

Midnight fireworks over the frozen waters of Frobisher Bay off the capital Iqaluit ushered in the new territory, along with traditional throat singing, dancing and the lighting of seal oil lamps.

Judges and legislators were sworn in, wearing seal-fur sashes.

Revellers later tucked in to a feast of Arctic delicacies, including raw caribou, seals, the salmon-like Arctic char, raw maktaaq, or whale skin with its blubber, and 3,600 clams.

One of those to be sworn in was Nunavut's new leader, Paul Okalik. Mr Okalik, a 34-year-old lawyer, said Canadian aboriginals felt enormous pride after decades of negotiations and planning.

Challenges

"We the people of Nunavut have gained control of our destiny and will once again determine our own path," he said.

"We have a daunting task...We are confident that by working with our western and southern neighbours we will overcome our enormous challenges."

Those challenges include:

• scarce housing, with a birth rate three times the national average
• high unemployment, affecting 22% of the population
• high educational drop-out rates
• alcoholism, with a quarter of residents classified as heavy drinkers - three times the national average
• high suicide levels, with 0.75% of the population committing suicide annually - six times the national rate.

Land settlement

New leader Paul Okalik (right) met the Canadian prime minister

Ottawa will pour in about C$800m each year into Nunavut - at an average cost of C$30,000 per resident.

It has also pledged more than C$1bn over 14 years for a land claim settlement that is part of the overall deal.

In exchange for wide autonomy, the people of Nunavut have relinquished their ancient territorial claims to land but will hold full economic control, including mineral rights, over 350,000 square kilometres (135,000 square miles), with control of the rest shared with the federal government.

Canadian Prime Minister Jean Chretien said the creation of Nunavut was a great step forward.