Prime Minister Nuri al-Maliki declared "Iraq Day" on Saturday to mark the end of a pact allowing US forces to stay in the country, two weeks after they left and with Iraq mired in a political row.
Maliki called for Iraqis to unite, and said the country's days of dictatorship and one-party rule were behind it, even as rival politicians have accused him of centralising decision-making power.
Speaking at a ceremony attended by several ministers and top security officials at the Al-Shaab stadium complex in central Baghdad, Maliki said December 31 was "a feast for all Iraqis" and marked "the day Iraq became sovereign".
"I announce today, the 31st of December, which witnessed the completion of the withdrawal of US forces, to be a national day," Maliki said. "We call it Iraq Day."
"Today, you are raising the Iraqi flag across the nation, and unifying under that flag. Today, Iraq becomes free and you are the masters."
He continued: "The withdrawal of US forces from Iraq returns the country to normality. That makes targeting civilians, police, the army and other security forces, or carrying out any sabotage against infrastructure a huge betrayal, and that puts those who commit these acts in the corner of the enemy."
US troops completed their withdrawal from Iraq on December 18, nearly nine years after Washington launched a controversial war to oust dictator Saddam Hussein.
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At their peak, American forces in Iraq numbered nearly 170,000 and had as many as 505 bases. Now, just 157 remain, under the authority of the embassy, to train Iraqi forces to use equipment purchased from the United States.
In 2008, Baghdad and Washington signed a deal which called for all US soldiers to leave Iraq by the end of 2011.
Efforts to keep a significant American military training mission beyond year-end fell through when the two sides failed to agree on a deal to guarantee US troops immunity from prosecution.
The Iraqi premier also told his countrymen that they should "be totally confident that Iraq has rid itself forever of dictatorship and the rule of one party, one sect, and one ruler."
Maliki's remarks came amid a festering political standoff in Iraq, with authorities having charged Sunni Vice President Tareq al-Hashemi with running a death squad and Maliki calling for Sunni Deputy Prime Minister Saleh al-Mutlak to be fired.
Mutlak and Hashemi's Sunni-backed Iraqiya party has boycotted parliament and cabinet meetings. Hashemi, who is holed up in the autonomous Kurdish region, rejects the accusations, while Mutlak has decried the Shiite-led government as a dictatorship.
The support of Iraqiya -- which narrowly won a 2010 poll and garnered most of its seats in Sunni areas, is seen as vital to preventing a resurgence of violence.
The Sunni Arab minority dominated Saddam's regime and was the bedrock of the anti-US insurgency after the 2003 invasion.