The Iraqi interim government has a hard task ahead of it. It is a group of little-known individuals facing a major insurgency, in a country battered by war.
Here are some of the biggest challenges:
SECURITY
Militants are expected to step up attacks in order to undermine the new government. But the US-led coalition has partially trained at most two-thirds of the 260,000 security personnel it says Iraq needs.
There is broad agreement that, despite the handover, Iraq needs more than the 160,000 foreign troops currently based in the country. The new Iraqi forces themselves are poorly equipped, and some have refused to fire against insurgents.
The casualties from insurgent attacks are increasingly Iraqis. A report by two US-based think tanks estimated that, as of 16 June, 11,317 Iraqi civilians have been killed by coalition action and militant attacks during and since the 2003 war.
POLITICAL LEGITIMACY
Few members of Iraq's interim government are well known in the country. Most were living abroad until last year. Their chief task is to create sufficient stability for elections to be held early next year.
Iraq is scheduled to have a fully democratic government by the end of 2005. By then, two sets of elections should have been held, and a new constitution drafted. The process must satisfy Iraq's Kurds as well as the larger Arab communities.
RECONSTRUCTION
A key task for the new government is to improve the lives of ordinary Iraqis. It can only do this by reviving the economy, reducing unemployment, and rebuilding shattered infrastructure.
Oil exports are Iraq's main source of revenues, so protecting pipelines and oilfields from insurgents will be crucial. The thousands of foreign contractors working on reconstruction projects have also been targets for attacks, so progress has so far been painfully slow.
JUSTICE
The new authorities are preparing to try Saddam Hussein and other former officials suspected of war crimes. Only when justice is done, and seen to be done, will Iraq be able to put the past behind it.
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IRAQ WAR CRIMES TRIBUNAL
Director: Salem Chalabi, US-educated lawyer
Budget: $75 million (2004/05)
Jurisdiction: Iraqis accused of committing genocide, crimes against humanity, war crimes and violations of some Iraqi laws, during the period of Baath party rule
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While the trials need to be public, transparent and fair, Iraq's war crimes tribunal wants to prevent Saddam Hussein using his as a platform for political speeches.
The first trials, of less senior figures, are expected to begin late in 2004.