President Bush delivers a speech in Chicago, May 22, 2006

President Bush says the formation of a unity government in Iraq marks a watershed for the greater Middle East. Mr. Bush pledged continuing U.S. support for the country.

The president says the Iraqi government is still a work in progress, but if its new leaders seize the opportunity they have been given, they can change the nation and the region.

"This is a free government under a democratic constitution and its formation marks a victory for the cause of freedom in the Middle East," said President Bush.

In a speech to representatives of the restaurant industry gathered for a convention in Chicago, Mr. Bush acknowledged Iraq is plagued with problems. But he said it is also a country with abundant natural resources, and an educated population

"Iraq's new leaders understand that so long as they remain united there is no limit to the potential of their country," he said.

President Bush singled out Iraq's prime minister, president and speaker for praise. He said as they gain public support and take on the day-to-day tasks of governing, the U.S. role will change. Mr. Bush made no direct reference to an American troop withdrawal, but indicated over time adjustments will be made.

"As the new Iraqi government grows in confidence and capability, America will play an increasingly supporting role," said Mr. Bush. "To take advantage of this moment of opportunity, the United States and our coalition partners will work with the new Iraqi government to adjust our methods and strengthen our mutual efforts to achieve victory over our common enemies."

President Bush also had a message for war-weary Americans. He acknowledged that three years after the invasion of Iraq, the situation is improving slowly. Once again, he urged patience.

"The progress we have made has been hard fought and it has been incremental," noted the president. "There have been setbacks and missteps, like Abu Ghraib, that were felt immediately and have been difficult to overcome. Yet we have now reached a turning point in the struggle between freedom and terror."

As the president was traveling to Chicago, the White House announced he would meet in Washington later this week with British Prime Minister Tony Blair. Mr. Blair paid a surprise visit Monday to Iraq.