Scores of Iraqi lawmakers stormed out of parliament on Tuesday after blocking a vote on the 2008 budget and other key bills, prompting calls for the legislature to be disbanded.

Parliament speaker Mahmoud Mashhadani, a Sunni Arab, told reporters he might ask the presidency council to dissolve the legislature unless the crisis was resolved. The council comprises Iraq's president and two vice presidents.

According to Iraq's constitution, parliament can dissolve itself with the consent of the absolute majority of its members, or upon the request of the prime minister and with the approval of the president. Mashhadani did not elaborate.

The walkout during an evening session, mainly by Shi'ite and Sunni Arab lawmakers, underscored the deep distrust between the country's different sectarian and ethnic groups.

"The crisis of confidence in parliament has grown," Bahaa al-Araji, a senior lawmaker from the movement of Shi'ite cleric Moqtada al-Sadr, told a news conference.

"I think we should admit the failure of the (political process), dissolve parliament and hold new elections."

In a rare moment of unity, Shi'ite and Sunni Arab MPs blamed the Kurdish bloc for the deepening legislative crisis. Kurdish lawmakers, who account for about 20 percent of the parliament, blamed their Shi'ite and Sunni Arab colleagues.

Lawmakers have been haggling over the $48 billion budget for weeks. Debate has been taking place at the same time on an amnesty law that could free thousands of prisoners and a bill on provincial powers that would define relations between Baghdad and local authorities.

In recent days, leaders of the political blocs agreed to vote on all three measures as a package because of mutual suspicion that if one was voted on separately and approved, the faction that wanted that most would renege on the rest.

DEEP DISTRUST

Sunni Arabs are backing the amnesty law because it could free thousands of mainly Sunni Arab inmates detained during the insurgency against U.S. forces and the Shi'ite-led government.

Some Shi'ite parties want the provincial powers law because it could devolve more power to the regions, including Shi'ite southern Iraq, home to most of the country's oil reserves.

The Kurds had wanted the budget passed giving them 17 percent of allocations, which some Shi'ite and Sunni Arab MPs had said was too much based on current population estimates.

A compromise was reached on Sunday whereby the allocation would remain 17 percent for this year but then be reviewed once a proper census had been carried out.

The agreement had been to read each article of each law first and then vote on all three as a package. Despite that disputes broke out over the order of voting, several MPs said.

"The Kurds demanded the budget, the provinces law and the amnesty law be voted on at once," said Khalaf al-Alayal, a Sunni Arab lawmaker.

"We rejected this as we didn't want to equate the release of prisoners with a financial contract to please the Kurds."

Ula Talabani, a member of the Kurdish bloc, accused Sunni Arab and Shi'ite Sadrist MPs of conspiring to block the agreement reached on sharing out the national budget.

"There was a deal between them to vote on the amnesty law, and then withdraw before reaching the budget law. After we learned this, we refused to vote on the amnesty law," she said.

It was not clear how the impasse would be resolved, although parliament is set to meet again this week.

The U.S. government has long been pressing Iraq's leaders to make progress on the legislative front.

U.S. Defense Secretary Robert Gates, once highly critical of the slow progress toward political reconciliation, said en route to Baghdad on Sunday that Iraq's leaders "seem to have become energised in the last few weeks".

Parliament passed a law last month that will allow former members of Saddam Hussein's Baath party to regain their jobs in the government and military, a key demand of minority Sunni Arabs who were dominant under Saddam.

In Moscow, Iraq's Foreign Minister Hoshiyar Zebari said Iranian and U.S. officials would meet within days in Baghdad for a new round of talks as part of efforts to build on progress in stemming sectarian violence.

He also said he was confident Iranian President Mahmoud Ahmadinejad would go to Iraq next month, a visit that would be the first by a leader of the Islamic Republic but which could also irritate the United States.