Balkenende heads a three-party team

His party has joined forces with the free market liberal VVD party and the centre-ground D-66.

The coalition government was sworn in by Queen Beatrix on Tuesday.

Liberal leader Gerrit Zalm becomes finance minister, a post he held for eight years under the old government of Wim Kok.

Mr Balkenende, 47, has tough political battles ahead. He must tackle serious problems in the country's economy, which is in recession.

His government is now expected to embark on a series of severe spending cuts, which will hit civil service jobs and welfare benefits.

The installation of the three-way coalition comes after months of unprecedented turmoil, which began last May with the assassination of anti-immigrant politician Pim Fortuyn.

Mr Fortuyn's party entered a coalition government with Mr Balkenende after achieving a strong election showing days after his death, but the coalition fell apart and fresh elections were held in January.

Even the fresh poll brought more uncertainty.

Labour talks

In the absence of a clear winner, Mr Balkenende started lengthy talks with Labour, but differences over budget cuts proved unbridgeable.

Labour leader Wouter Bos, who would not agree a deal on the cuts, said the measures were "anti-social", and would benefit the wealthy and hurt people with lower incomes.

The Christian Democrats have eight seats in the cabinet, the liberals six and D-66 two.

The negotiations which led to the new coalition were the longest in the Netherlands in a quarter of a century.