Iraq's US-appointed Governing Council announced yesterday a transitional government would take over by the end of June from the US-led powers, in a far swifter restoration of Iraqi sovereignty than first envisaged. In a new blow to occupying forces trying to stabilise Iraq, a US helicopter crashed in a residential area in the northern city of Mosul.

Witnesses said two helicopters had crashed, but the US military could only confirm one aircraft was down.

A US military spokesman said initial reports indicated that a UH-60 Black Hawk helicopter had come down in northern Iraq and that a rapid reaction force was securing the area and investigating. He gave no further details or mentioned casualties. Two US helicopters have already been shot down in Iraq this month, at a cost of 22 American lives.

Facing a mounting death toll and increasingly audacious guerrilla attacks, Washington has been pushing for a faster transfer of power to Iraqis. The US-led administration has abandoned its insistence that a sovereign Iraqis government take over only after a constitution is completed and elections held.

The Governing Council, created by US administrator Paul Bremer in July, said a constitution would be written and elections held by the end of 2005, but that a sovereign transitional government would be in place well before then. "I am very happy and proud. The dream of the Iraqi people has been achieved today," Jalal Talabani, the council's current chairman, told reporters.

In Washington, US President George W. Bush issued a statement yesterday welcoming plans for a transitional government by June and said it was an important step for Iraq. On Friday, Bush insisted the United States would stay in Iraq until it is "free and peaceful".

A transitional assembly will be selected by May next year by caucuses in each of Iraq's 18 provinces. That assembly will pick the transitional government from amongst its ranks by the end of June, Talabani said in a prepared statement.

"At its assumption of power, the state of occupation would end," he told a news conference after the council met for several hours with Bremer, who was called to Washington earlier this week for urgent consultations.

While Iraq will no longer legally be in a state of occupation, Washington fully expects any new government to request a sizable US-led force to remain in the country. "The presence of the forces of the United States and other countries will be discussed by the transitional government," said Talabani.

"If we need them to stay, we will ask them to stay. If we don't, we will respectfully ask them to leave." But more than seven months after US-led invasion forces ousted Saddam Hussein, Iraq remains far from calm.

The US military said one US soldier was killed and two soldiers were wounded in Baghdad by an improvised bomb yesterday. Insurgents, now mounting some 30 attacks a day, have killed 160 US soldiers in Iraq since Bush declared major combat over on May 1.

US forces in Baghdad have hit back with "Operation Iron Hammer" for the past three days, using air strikes to destroy buildings they say were used by insurgents. Witnesses in Mosul said two US helicopters may have collided over the city and crashed.

Critics of US policy, such as France and Germany, have long urged Washington to hasten the power transfer to convince Iraqis enraged by the occupation that its end may be in sight. Adnan Pachachi, another member of the Governing Council, said the United States had now agreed to act on Iraqi aspirations for self-rule.

The council statement said a basic law would be drafted by February formalising the political roadmap. Talabani said the Governing Council may replace its current system of a rotating presidency with the post of prime minister next month.

The bodies of 16 Italian military personnel and two civilians killed in a suicide bombing on Wednesday in the southerh Inraqi town of Nassiriya were returned to Rome yesterday, where political leaders and military honour guards were waiting. Another soldier who had been wounded in the blast died in Kuwait on yesterday. State funerals for those killed in Italy's worst military disaster since World War II will be held on Tuesday.

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