BAGHDAD, Feb 13 (Reuters) - Sick of bloodshed that has hit their economy and inflamed sectarian wounds, Iraqis held little hope on Monday that Prime Minister Ibrahim Jaafari could cure in his second term the ills he failed to heal in his first.

The soft-spoken doctor was nominated by his ruling Shi'ite Islamist alliance on Sunday to lead a new government nearly two months after Iraqis voted for their first four-year parliament.

"I expect a tragic end for Iraq with Jaafari keeping his position," said Falih Abdul Qadir Latif, owner of an electrical store in the mixed city of Baquba, northeast of the capital.

"This man is not able to present any solutions; the problems Iraqis and Iraq are facing are evidence of his failure. We have to face the next four years reluctantly."

As a member of the biggest bloc in parliament, Jaafari is all but certain to keep the top job in Iraq's government.

Some Iraqis expressed confidence in him. But they said his success would be measured by his ability to take a tough line with ministers without igniting sectarian passions.

"Jaafari is a suitable person to lead the government but he needs to be firm in dealing with his ministers without discrimination over their political and ethnic backgrounds," Samah Abdallah, 28, who works at Diyala University.

Sunni Arabs and Kurds have criticised Jaafari, a Shi'ite Islamist, for fuelling sectarianism and said his likely return had dashed their hopes for new blood as a largely Sunni insurgency rages, leaving the oil-producer's economy in tatters.

ANOTHER CHANCE

As prime minister, Jaafari angered the Sunni Arab minority by visiting Shi'ite Iran and describing ties between the old foes as "very friendly and strong and expanding".

Sunni fighters in the western city of Falluja, a nerve centre of anti-American feeling, said they would oppose him, partly because of mounting accusations that his government condoned secret Shi'ite death squads targeting their community.

"Jaafari is a sectarian person and a collaborator with the Americans and Iran," said 58-year-old Abu Abdallah, a member of the 1920 Revolution Brigades, a militant group.

"He's weak so there's no point in him returning to the government. We don't recognise any part of the collaborator government that was imposed by the American occupation."

Jaafari also lost favour with the Kurds, who have accused him of monopolising power and failing to honour the deals he made to win Kurdish support when he first took office after elections in January last year.

The Kurds say Jaafari has not done enough to back their claim to the oil-rich but disputed northern city of Kirkuk, which Kurds want as the capital of an autonomous region.

"The election of Jaafari is not in Kurdish interests especially since his performance over the past year when it comes to Kirkuk has been against the Kurds," said Nabz Abdallah, 25, who lives in the Kurdish city of Sulaimaniya.

Jaafari promised when he first became prime minister to use dialogue and diplomacy to heal the country's sectarian rifts. He renewed that pledge after his nomination on Sunday.

Some Iraqis said Jaafari's only serious rival, Vice President Adel Abdul Mahdi, a senior official in Jaafari's main coalition partner SCIRI, could have done a better job.

Others do not want an Islamist prime minister at all, but would prefer to bring back secular Shi'ite Iyad Allawi, who led a transitional government in 2004 and is widely seen as a strong man who can effectively end the insurgency.

But Ayub al-Izzi, a taxi driver in Baquba, backed Jaafari, saying he would be better able to prove himself with a full term in government, theoretically up to four years.

"A full term for Jaafari will give help the next government perform better -- it didn't get enough of a chance to show what it can achieve before," he said.