Troops are struggling to restore order
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The deputy head of the Anglo-American administration in Iraq has said that there are too few troops in the country to bring order.
Major General Tim Cross, the British number two in the Office of Reconstruction and Human Assistance, said there were particular problems in Baghdad although he insisted they were being addressed.
The top civilian administrator, American L Paul Bremer, said the administration was doing what it could to improve conditions for Iraqis in Baghdad.
"We take it seriously. That is why we are spending so much time and energy trying to fix it," he told reporters in Baghdad on Monday.
He said that conditions for people outside Baghdad were generally better than in the capital.
He also said that he was establishing a "de-Baathification council" to help root out the influence of former leader Saddam Hussein's party.
And he said $250m had been recovered when vaults at the Central Bank of Iraq were drained of river water.
"It belongs to the Central Bank and that's where it will stay," he said of the money.
Ambush
His statements came shortly after a US soldier was killed and another injured in an ambush north-west of Baghdad.
Things are definitely getting better
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"An unknown number of attackers fired small arms, rocket-propelled grenades and heavy machine guns at the convoy," a statement from Central Command said.
The names of the two casualties have not been released, pending notification of next of kin, the military said.
Major General Cross admitted to being surprised at Iraqi behaviour.
"The whole regime over 30 years had really made such a huge impression on people in Iraq that I for one had underestimated that," he said.
"I was surprised how people would just not move without some form of authority.
"There's no doubt that bringing a nation back to life is not easy and we have had lots of difficulties, and we will have more in the days ahead.
"But things are definitely getting better."
The BBC's correspondent in Baghdad, Richard Miron, says the city is still a dangerous place with few people venturing out after dark.
Looting has damaged the infrastructure, making the supply of water and electricity unreliable.
Sickness
As a result, aid agencies say, sickness is an increasing problem.
And frustration with the Americans among the population is growing.
Dominic Nutt, from Christian Aid, said there was a lot of insecurity among aid workers.
You can't have soldiers on every street corner but that's what you need
Dominic Nutt Christian Aid
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He said: "I spent one night with my colleague pinned down under gunfire on a roof in Basra.
"Eventually a British tank came up and calmed the situation down.
"It parked outside for ten minutes and then went away and then it (the shooting) started up again.
"You can't have soldiers on every street corner but that's what you need."
The American official charged with establishing a new Iraqi police force has warned that it may take some time for law and order to be re-imposed.
Bernard Kerik, a former New York city police commissioner who arrived in Iraq just under a week ago, said many officers would have to be retrained and new ones would have to be recruited.