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A peace-maker who often mediated among Iraq's Shi'ite, Sunni and Kurdish factions, 79-year-old Talabani was flown abroad in December in critical condition.

"I am in continuous contact with the German team treating President Talabani," said Najmaldin Karim, who is also governor of the city of Kirkuk.

"He can talk now with the people around him and started to think in a good way. I and the German team are optimistic that he will get much better and can return back to Iraq soon."

During Talabani's absence, Iraq's political crisis has intensified, with thousands of Sunni Muslims taking to the streets in protest against the Shi'ite-led government

The veteran politician often worked to ease tensions in the country's fragile power-sharing government and negotiated between Baghdad and the autonomous Kurdistan region, which are locked in feud over land and oil rights.

(Writing by Isabel Coles; Editing by Nick Macfie)