Attacks on civilians had jumped 90 percent across Iraq since a Shi'ite shrine was bombed in February, but "ethno-sectarian" bloodshed had more than halved in Baghdad in the past week, U.S. spokesman Major General Rick Lynch told a news conference.
"We are not seeing widespread militia operations across Iraq. We are not seeing widespread movement of displaced personnel," he said. "So we do not see us moving toward a civil war in Iraq. In fact we see us moving away from it."
The Sunni Arab insurgency against U.S. and Iraqi forces and the mounting sectarian violence against civilians after the shrine attack raised fears Iraq was sliding into civil war.
Prime Minister-designate Nuri al-Maliki hopes to form a new government uniting majority Shi'ites with Sunni Arabs and Kurds next week, a move widely seen as critical to ending the bloodshed.
"We believe that the people of Iraq ... have grown tired of the insurgency, have grown tired of these casualties and indeed are going stop this cycle of violence," Lynch said.
"And when the government is formed and truly reaches out to the people, we believe you'll see a great decline in violent activities in Iraq."
"Because now you have got a Sunni politician who is standing up for the people of Iraq and saying let's do the right thing for the people of Iraq and not worry about Sunnis versus Shias versus Kurds," he said.
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