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Amid political instability and violence, Iraq's economic problems have been viewed as secondary and unrelated. They are not. U.S. and Iraqi institutions have systematically lost and the insurgency gained momentum as living conditions failed to improve.

The situation in Iraq is more precarious than at any time since the April 2003 ouster of the Baathist regime, largely reflecting the Coalition's inability to establish a legitimate and representative political transition process.

The removal of the Ba'ath regime in 2003 opened a Pandora's box of long-suppressed aspirations, none as potentially explosive as the Kurds' demand, expressed publicly and with growing impatience, for wide-ranging autonomy in a region of their own, including the oil-rich governorate of Kirkuk.

The contrast is striking.

As attacks against the occupying forces and suicide bombs against civilian targets intensify, the need for a new political formula that will increase the powers, legitimacy and representative quality of Iraqi governing institutions is becoming more urgent than ever.

The massive car bomb in Najaf on 29 August 2003, which took the lives of over 90 Iraqis, including the prominent cleric Ayatollah Mohammad Baqir al-Hakim, has put renewed focus on the fate of the country’s Shiites.

The horrific bombing of the UN headquarters in Baghdad on 19 August 2003 has focused renewed attention on the question of who, if anyone, is capable of governing Iraq in the current highly volatile environment and, in particular, on what ought to be the respective roles, during the occupation period, of the Coalition Provisional Authority (CPA), the Interim Governing Council and the United Nations.