QARAQOSH, Iraq (Reuters) - In a town ravaged by the war against Islamic State, amid ransacked homes and shuttered shops, a flashing sign above the entrance to one business beckons visitors: “Welcome”, it reads.

People have drinks at a bar in the town of Qaraqosh, south of Mosul, Iraq, July 18, 2017. Picture taken July 18, 2017. REUTERS/Thaier Al-Sudani

Inside, the floors are carpeted, the lights are low, and the gurgling sound of water pipes accompanies hushed conversations between men drinking beer in small groups.

It is the first bar to reopen since Islamic State militants were routed from the northern Iraqi town of Qaraqosh nine months ago in the early stages of a campaign to retake Mosul, around 15 km (10 miles) west.

The customers are mainly local Christians tentatively returning home three years after fleeing en masse when the jihadists overran their town and issued an ultimatum: pay a tax, convert to Islam, or die.

Some of the bar’s patrons, however, are Muslims, savoring the freedom to drink and smoke, which they were denied under Islamic State.

They come here for respite from the grim realities of the conflict, but for Muslim and Christian customers alike, the conversation soon turns to the war and its aftermath.

“It’s hard to forget that until now there are people under the rubble,” said 45 year-old Abu Khalid, a Muslim from Mosul, sharing a bottle of lemon flavored vodka with two friends in the mid-afternoon.

“Why do we drink? So we can release our problems,” he said, wearing traditional Arab dress. “Alcohol loosens the tongue”.

Iraq declared victory in Mosul last week, but it will take longer for people to recover from Islamic State’s occupation.

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Many lost relatives, homes and livelihoods, and reconciliation between different communities is a major challenge.

NEW DANGERS

For Christians, who trace their history in Iraq back two millennia, Islamic State has called into question the very future of their community in the predominantly Muslim Middle East.

The owner of the bar, Abu Firas, hopes that re-opening it will breathe life back into his town and help reverse the exodus of its Christian population.

He has covered up bullet marks in the wall with posters advertising beer, and filled in a large hole the militants made behind the kitchen sink, which enabled them to move undetected into the shop next door.

“Day by day it (business) is getting better,” he said optimistically. Although Islamic State is expected to revert to insurgent tactics like bombings as its “caliphate” falls apart, Abu Firas is undaunted: “We are not afraid,” he said.

Around 400 families have now returned to Qaraqosh -- also known as Hamdaniya -- which was the largest Christian settlement in Iraq until Islamic State took over, with a population of more than 50,000.

I love my town. I want it to go back to the way it was,” said a Christian customer who sat with three friends taking a break from repairing homes torched by the militants.

The 49-year-old returned to Iraq 15 days ago from Europe, where he fled after Islamic State’s invasion. “I haven’t decided whether to go back to France or stay here,” said the man, who asked to remain unnamed.

His main concern is security, but it is not Islamic State that worries him. The danger, he says, is of violence between rival paramilitary groups that now patrol the streets of Qaraqosh and the surrounding area. Last week, two Christian militias clashed in the town.

On a more positive note, the customer said the presence of Muslims in the bar showed that peaceful co-existence with Christians was still possible.

He later admitted, however, that trust between the two communities was broken because many Sunni Muslims from the surrounding villages had supported Islamic State.

The bar is open to outsiders only until 8 pm. After that, just Christians are welcome.