But traditional wishes for a happy new year took on additional urgency on the third anniversary of the US-led invasion of Iraq with the country teetering on the edge of civil war.

"I hope that this coming year will strengthen federalism in the country and strengthen brotherhood between Kurds and Arabs," Iraqi President Jalal Talabani, a Kurd, said in a new year's message.

"I hope that this year will bring a federal, democratic Iraq free from terrorism and murder," he added, repeating a key Kurdish demand that Iraq remain a federal republic granting Kurds widespread autonomy in their three northern provinces.

The violence wracking the center of the country is largely absent here as families headed to mountainside resorts over the four-day holiday, but the turmoil elsewhere remained on people's minds.

"I wish in my heart that there will be peace and happiness in Iraq and the country will be rid of terrorism," said Soma Karim, who stayed in Arbil for the holidays.

Government buildings in Arbil were draped in festive holiday bunting.

"I hope a united national government will be formed and Iraq and the Kurds will get their rights," said Shelan Ahmed.

Negotiations to form a new national government, which took a week-long break just before the holiday, are still deadlocked more than three months after Iraqis went to the polls.

On Monday night, Kurds gathered in the center of town to mark the beginning of the holiday carrying candles while dancing and singing traditional songs for the occasion.

The Kurds' Newroz is similar to neighboring Iran's Noruz and has been celebrated for at least 3,000 years, long predating Islam.

Rooted in Iran's native Zoroastrian religion, the festival is celebrated throughout large stretches of Asia where the Persian Empire was historically influential.

Police and peshmerga fighters, the heavily armed Kurdish militia, were on high alert for any kind of insurgent attack during the holidays, Arbil governor Nuzad Hadi told AFP.

"The Kurdish authorities implemented very strict security measures to ensure the celebrations could take place peacefully and quietly," he said.

Cars without license plates were also banned from circulating in the streets of Arbil.

While insurgent attacks are rare in the northern provinces, the Kurds have their own woes as witnessed by recent riots in Halabja, when thousands of Kurdish students protested government corruption and a lack of services.

The administration of the autonomous region's three provinces remains divided between the two main Kurdish parties. Despite numerous pledges to unify, the parties remain arch rivals.

"With this year, all of Kurdistan eagerly awaits the unification of the two administrations and the commencement of the mission to provide its citizens better services," the Arbil-based regional parliament said in a statement.