Kurdish politician Fuad Masum became Iraq's new president Thursday, in a step towards forming a government that visiting UN chief Ban Ki-moon said must be inclusive for the country to survive.

A June onslaught on Sunni Arab areas north and west of Baghdad led by the jihadist Islamic State (IS) group has brought Iraq to the brink of breakup, with the government struggling to assert any authority beyond its Shiite power base.

Parliament elected Masum, who served as the first prime minister of Iraq's autonomous Kurdish region more than two decades ago, by an overwhelming majority of 211 votes to 17.

Under an unofficial power-sharing deal, Iraq's Kurds traditionally get the post of president.

The move could pave the way for a deal on the much more powerful post of prime minister.

The UN chief met current Prime Minister Nuri al-Maliki and stressed the need for a broad-based government to be formed as soon as possible to save the country from collapse.

"Iraq is facing an existential threat but it can be overcome by the formation of a thoroughly inclusive government," he said at a joint news conference with Maliki.

"It is critical that all political leaders fulfil their responsibilities to ensure that the government formation process falls within the constitutional timetable," he said.

Hours later and only a short drive from where Ban was speaking, twin car bombs ripped through a busy restaurant and shopping area of central Baghdad, killing at least 15 people, police and medical sources said.

The Shiite premier has accused mainstream politicians from the Sunni Arab minority of condoning the IS offensive and of "dancing in the blood" of the onslaught's victims.

- Prison convoy attacked -

But many retort that it was Maliki's own brand of sectarian politics that brought the country to the brink of collapse, and he now faces intense domestic and foreign pressure to step aside.

He was also criticised over the army's poor performance in the face of the lightning offensive launched in second city Mosul on June 9.

Insurgents launched a spectacular pre-dawn assault Thursday on a convoy transferring inmates convicted of terrorism charges in Taji, only 25 kilometres (15 miles) north of Baghdad.

According to police and medical sources, at least 60 people died in the attack, which saw militants ram a security convoy with a suicide car bomb before detonating other bombs and raking it with gunfire.

Nearly all of the 60 prisoners believed to be on the bus died.

It was not immediately clear how many attackers died, nor how the prisoners they were apparently trying to free were killed.

Human rights watchdogs have accused retreating Iraqi troops of having executed more than 250 prisoners since June 9 in an apparent bid to prevent them from joining the ranks of advancing IS fighters.

Seven Kurdish peshmerga fighters were killed Thursday in intense clashes with IS militants in the flashpoint town of Jalawla, a doctor and a peshmerga officer told AFP.

Ban's speech focused on Iraq's "struggle against terrorism" and condemned the IS offensive, which has forced more than 600,000 people from their homes in a matter of weeks.

The past week saw IS spark a new international outcry with an ultimatum that purged Mosul of its centuries-old Christian community.

- Ban meets Sistani -

Despite the billions of dollars spent on training and equipment by the United States during its eight-year occupation, Iraq's million-strong army completely folded when the insurgents attacked last month.

They have since received the support of thousands of Shiite volunteers and some foreign military assistance, but the government has so far proved unable to claw back any lost ground.

After meeting Maliki in Baghdad, Ban travelled to the shrine city of Najaf, where he met the reclusive Grand Ayatollah Ali al-Sistani, Iraq's most revered Shiite cleric.

Ban told reporters that Sistani had stressed that the fight against IS "should be exclusively conducted by the Iraqi security forces and only within the framework of the constitution".

A fatwa from Sistani last month for Iraqis to join the security forces sparked mass enrolment in Shiite militias with dubious rights records, a move decried by Sunnis.

Maliki has complained the world is not doing enough to help him tackle IS, an Al-Qaeda offshoot which appears to be outgrowing the network founded by Osama bin Laden.

As the premier met the head of the US Central Command, General Lloyd Austin, in Baghdad Thursday, his defence minister was in Moscow with a wish list of Russian military equipment.

Inclusive govt can overcome Iraq 'existential threat': Ban
Baghdad (AFP) July 24, 2014 - The formation of a truly inclusive government is required to overcome the threat of Iraq's breakup along ethnic and sectarian lines, UN Secretary General Ban Ki-moon said in Baghdad Thursday.

"Iraq is facing an existential threat but it can be overcome by the formation of a thoroughly inclusive government," he said at a joint press conference with Prime Minister Nuri al-Maliki.

"It must be a government in which all Iraqis feel represented," said Ban, who has been touring the region mainly in a bid to quell the bloodshed in Gaza and whose Baghdad stop was not initially scheduled.

His visit came hours after a breakthrough in what has been a protracted and acrimonious process to renew Iraq's leadership.

Maliki's coalition won April polls comfortably but the Shiite premier has faced growing domestic and foreign pressure to step aside since a jihadist-led onslaught sparked Iraq's worst crisis in years and threatened to redraw the map of the Middle East.

Iraq's Kurds traditionally get the post of president and earlier Thursday agreed on a common candidate, a move which could pave the way for a deal on the much more powerful position of prime minister, which goes to a Shiite Arab.