Key rebuilding projects in Iraq are grinding to a halt because American money is running out and security has diverted funds intended for electricity, water and sanitation, according to US officials.

Plans to overhaul the country's infrastructure have been downsized, postponed or abandoned because the $24bn (£13bn) budget approved by Congress has been dwarfed by the scale of the task.

"We have scaled back our projects in many areas," James Jeffrey, a senior state department adviser on Iraq, told a congressional committee in Washington, in remarks quoted by the Los Angeles Times. "We do not have the money."

Water and sanitation have been particularly badly hit. According to a report published this week by Government Accountability Office, the investigative branch of Congress, $2.6bn has been spent on water projects, half the original budget, after the rest was diverted to security and other uses.

The report said "attacks, threats and intimidation against project contractors and subcontractors" were to blame. A quarter of the $200m-worth of completed US-funded water projects handed over to the Iraqi authorities no longer worked properly because of "looting, unreliable electricity or inadequate Iraqi staff and supplies", the report found.

So, Krugman was right on when he called this the `can't-do'-government. If Iraq is an example of there competence, or better incompetence, I really fear for the Katrina survivors. What they forgot to mention is the money detoured to Halliburton et al.
And I really `liked' the following:

He said non-US sources might be asked to plug the gap.