Protests intensify in Iraqi Kurdistan amid economic crisis

ERBIL, Iraq Protests intensified in Iraq's Kurdistan region on Tuesday after the government unveiled new austerity measures to avert an economic collapse that officials warn could undermine the war effort against Islamic State.

Some Kurdish peshmerga fighters blocked the main road outside their base in the city of Sulaimaniyah on a third day of strikes and demonstrations by police and other government employees demanding their salaries.

Hit hard by the global slump in oil prices, the Kurdistan Regional Government (KRG) last week said it would pay only part of state workers' salaries until its fiscal health improved.

The new measures do not include employees of the Interior Ministry or peshmerga who have pushed Islamic State back in northern Iraq, but the KRG is already several months in arrears.

"It's four months since we received our salaries," one of the protesters told local TV channel NRT. "Frankly the peshmerga can no longer put up with this."

Another peshmerga chipped in: "This government has lost its legitimacy. They must make way for other people."

Kurdish officials have warned that the economic crisis could increase desertions from the peshmerga, and are asking foreign powers including the United States for financial assistance.

Peaceful demonstrations were also held in the towns of Koya, Halabja and Chemchemal. In recent days there have strikes and small protests in the regional capital Erbil, where displays of public anger are rarer.

A decade-long economic boom in the autonomous region came to an abrupt halt in 2014 when Baghdad slashed funding to the Kurds after they built their own oil pipeline to Turkey and began exporting oil independently.

That left the KRG struggling to meet a bloated public payroll of 875 billion Iraqi dinars ($800 million) per month.

The KRG has tried to make up the shortfall by increasing independent oil sales to around 600,000 barrels per day (bpd), but at current prices the region is still left with a monthly deficit of 380-400 billion Iraqi dinars ($717 million).

The war against Islamic State and an influx of more than a million people displaced by violence in the rest of Iraq has only compounded the crisis, which is also the result of years of mismanagement and corruption since 2003's U.S.-led invasion.

Protests against delayed salaries last October turned violent and deepened a political crisis that has yet to be resolved.

(Reporting by Isabel Coles; Editing by Catherine Evans)