"Coalition forces will remain under coalition command," he told reporters after the end of the main session of a NATO summit here. "They will stay as long as stability of Iraq requires," he said.

Bush was speaking at told a joint news conference with British Prime Minister Tony Blair, his closest ally in last year's invasion to topple Saddam Hussein.

The US-led occupation force handed over formal sovereignty in Baghdad earlier on Monday to an interim government led by Iraqi Prime Minister Iyad Allawi.

Bush described the handover as "a proud moral achievement" and said Allawi's team was "leading their people to a better day." He added: "They'll have our friendship and our support no matter how tough it gets."

Bush explained that the decision to bring forward the power handover was taken by Iraqi Prime Minister Iyad Allawi.

"That's why the handover took place today as opposed to 48 hours later," he said, adding: "I supported the decision. I thought it was a smart thing to do."

"It's a proud moment for the Iraqi people. They're gutsy, they're courageous," he said, adding that "They will lead their people to a better day."

WAR.WIRE