The prime minister has welcomed the "historic" appointment of an interim Iraqi government.

But at a press conference held in Downing Street, Tony Blair also warned that terrorists would continue attacks aimed at disrupting the smooth hand over of power to a sovereign Iraqi administration on June 30.

It was announced in Baghdad on Tuesday that Ghazi Yawer would take over as Iraq's president while Iyad Allawi would become prime minister.

Both appointments are thought to have been largely at the behest of the Governing Council, but President Bush also gave his backing to the new leaders.

In London, the prime minister said that the latest moves in Baghdad should be followed by a new United Nations security council resolution setting out the terms of the transfer of sovereignty.

Blair said he wanted to "offer my congratulations to the new Iraqi prime minister, the president, the two vice-presidents and the rest of the Cabinet and say I believe this is a truly historic day for Iraq".

"This new Cabinet will help Iraq, first of all, to independence and full sovereignty after June 30, and then to the transition towards democracy which will allow Iraq finally to be governed by Iraqis under a stable and democratic system," he added.

"That will be a huge bonus not just for the people of Iraq but also for the whole of the Middle East, for peace and for the stability of the world."

But he also warned that move violence could be expected in the country, saying that "those people who are opposed to Iraq to becoming a stable democratic country, who want Iraq to be run by extremists or fanatics of one kind or another, will continue to try to disrupt this process".

"They will do everything they can to kill or injure anybody who is helping the country of Iraq get on its feet as a stable democracy.

"I hope with this announcement today, people realise that there is that very clear division between, on the one hand, the new Iraqi government, the Iraqi people, the multi-national forces and the United Nations, who are trying to assist Iraq towards stability and democracy, and on the other, the sort of terrorists and fanatics who are trying to stop it.

"In that struggle, we shouldn't be neutral, we should be there absolutely on the side of the Iraqi people."