Athens 2004 SoccerParaguay brought Iraq's fairytale Olympic run to a shuddering halt with a 3-1 win in the semi-finals yesterday.

Striker Jose Cardozo fired two first-half goals to stun a raucous section of around 3,000 Iraq fans in the northern Greek city of Thessaloniki.

Fredy Bareiro added a third in the 68th minute and Paraguay will now face South American rivals Argentina in Saturday's final after the favourites swept past Italy 3-0 in Athens.

Substitute Razzaq Farhan pulled a goal back for Iraq in the 83rd minute. However, they can still win only the second Olympic medal in the war-ravaged country's history if they overcome the Italians in the third-place match on Friday.

Their only previous Olympic medal was a weightlifting bronze at the 1960 Rome Games. "For us it is still a great achievement to play for third place and try to to win the bronze medal, taking into account all the difficulties in Iraq," said Iraqi coach Adnan Hamd.

For vanquished Iraq, there was honour in defeat, having endured severe hardship simply to qualify for the Athens Games. Their improbable Olympic run sparked scenes of wild celebration on the streets of Baghdad.

But they were completely outclassed by a skilful Paraguay side, who would have won by a far greater margin had it not been for several athletic saves from Iraqi goalkeeper Nour Sabri.

Fans in Baghdad were just delighted. "I'm very proud of my team. It's great that the world got to see that we are not just people with AK-47s and rocket-propelled grenades. We also know how to compete in the Olympics," said Rasheed Rumayed (24), who watched the match on a television set at a Baghdad sidewalk market surrounded by fruit and vegetables.

Favourites Argentina swept Italy aside to march into the final without having conceded a goal in five games.

Argentina were so dominant at times that they could have doubled their 3-0 score. Italy were outclassed and had no answer to the dynamic movement and sweeping attacks of their hungry opponents who have now hit 16 goals without reply.

Argentina's tournament-leading goalscorer Carlos Tevez opened the scoring with a volley after 16 minutes, Luis Gonzalez added the second with a thunderous shot on the run after 69 and late substitute Mariano Gonzalez converted the third, from a Tevez pass, with his first touch after 85 minutes.

Tevez now has seven goals in five games, a return that has attracted the attention of European scouts and interest from German clubs.

Argentina last appeared in the Olympic final when they were beaten by Nigeria at the Atlanta Games in 1996. They are seeking their first Olympic gold medal in the sport, having twice before won silver.