Parliamentary speaker Mahmoud al-Mashhadani said the lawmakers would resume sessions on Sept. 9. He ordered a committee to continue negotiations over the election bill and said a special session could be called if agreement is reached.
The decision to go into summer recess came after lawmakers failed to break a deadlock over Kurdish opposition to a power-sharing formula for the northern oil-rich city of Kirkuk despite days of intense negotiations and heavy pressure from U.S. and U.N. officials.
Officials involved in preparations for the elections - which the U.S. believes are a necessary step toward national reconciliation - have said such a delay would likely push voting to next year.
Deputy parliamentary speaker Khalid al-Attiyah, however, insisted the provincial elections could be held this year as long as the legislation is passed in September.
Adoption of the elections law had been linked with the budget proposal, which needed to be approved before the lawmakers could adjourn, according to the constitution.
Parliament adjourned for the summer break last week but met four days in a special session to try to approve the budget and election bills.
Finance Minister Bayan Jabr has said passage of the supplemental budget would augment the overall budget by some US$70 billion this year and is needed for food rations, fuel for power plants and raises for civil servants.
Approval of the budget measure came as U.S. lawmakers complained that the Iraqis were not paying enough for their own reconstruction.
A General Accounting Office report released Tuesday said Iraq could end the yearas oil revenues pile on top of leftover income the Iraqis still haven't spent on their national rebuilding effort.
U.S. officials said Wednesday that Iraq is paying for more of its own reconstruction, but is still struggling to spend its multibillion dollar surplus as it copes with a flood of oil revenue and a cumbersome approval process meant to curb corruption.
The main sticking point on the election bill was Kurdish opposition to a plan that would equally divide the provincial council seats for Tamim province, of which Kirkuk is the capital, among Kurds, Turkomen and Arabs.
Kurds and their allies currently hold a majority on the council and fear a dilution of their power as they seek to annex the oil-rich area into their semiautonomous territory to the north.
Iraq's largest Sunni Arab party, the Iraqi Islamic Party, called for a vote on the measure to be delayed until after a monthlong summer break that parliament had been due to begin last week.
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