The Hungarian parliament has approved Socialist Peter Medgyessy as the head of the country's fourth government of the post-communist era.

The new prime minister and his coalition government, comprising the Socialists and Free Liberals, took the oath of office some five weeks after a fierce election campaign which divided the country along left and right camps.

The Socialist-led coalition has a narrow 10-seat majority in the 386-seat house over the ousted right-wing coalition of former Prime Minister Viktor Orban. Following his defeat, an estimated 500,000 people gathered in Budapest to show their support for the ejected leader.

Mr Medgyessy, a former foreign minister and financial expert, has said he will work hard to overcome the divisions which still linger following last month's election, but the BBC's Nick Thorpe in Budapest says that it will not be an easy task.

Economic changes

Since the poll, the incoming Socialists and Liberals and the ejected Conservatives have continued their war of words, and Mr Orban will not even be allowed an office in the new parliament.

Ousted Orban will not even be allowed an office in parliament

Mr Medgyessy is likely to lead Hungary into the European Union in 2004, and foreign policy as a whole is likely to remain similar to that of the previous government.

But our correspondent says there will be significant differences in economic and social policy.

The new government is proposing a new social contract with the poor, offering more financial support to low-income families, and greater assistance to young couples.

The minimum wage will not be taxed, and there will be a 50% pay rise for those working in the health, education and public administration sectors later this year.

The coalition has also promised to create up to 400,000 new jobs.

Mr Orban has formed a fresh coalition of opposition forces following his defeat.

The new movement, which gathers together several right-wing groups, is modelled on Italian Prime Minister Silvio Berlusconi's Forza Italia, and correspondents say it is likely to be dubbed "Go Hungary!".