Iraq's interim Prime Minister Iyad Allawi declared martial law today and said a US-led military offensive against the rebel-held city of Falluja could not be delayed much longer.
Insurgents have intensified violence in Iraq to show their muscle before the US offensive on Falluja begins and police said gunmen killed 23 policemen in three attacks today.
Mr Allawi was doing all he could to find a peaceful solution, his spokesman Mr Thair al-Naqib said.
"He still hopes that it may be possible to avoid a major military confrontation in Falluja ... He is, however, not optimistic," Mr Naqib said.
The Americans say they are only awaiting the word from Mr Allawi, who returned from Europe yesterday, to attack.
The interim government earlier declared a state of emergency in all areas of Iraq, except the region of Kurdistan, for a period of 60 days.
The state of emergency, equivalent to martial law, was intended to ensure security before January polls, Naqib said.
The government gave itself emergency powers soon after replacing Iraq's US-led administration on June 28, but it has not yet used them despite a raging insurgency.
Moments after the announcement, a car bomb exploded near the house of Iraqi Finance Minister Mr Adel Abdul Mahdi in central Baghdad's Karrada district, killing two people.
"I am fine. I was far away from the place where this explosion happened," Abdul Mahdi said by telephone.
Hospital staff said they had received the bodies of a policeman and a bodyguard. The US military said an American soldier was wounded in gunfire that erupted after the blast.
Mr Abdul Mahdi is a senior official of the Supreme Council for the Islamic Revolution in Iraq, a powerful Shi'ite party.
The bloodiest attack on police was in Haditha, 200 km (125 miles) northwest of Baghdad, where rebels stormed a police station at dawn, wounding six policemen.
Assailants took 21 captured policemen to an oil pumping station area and shot them execution-style.
Brigadier Shaher al-Jughaifi, security chief in western Iraq, died in an attack on a police post in nearby Haqlaniya.