BEIRUT - Lebanon's Prime Minister Saad al-Hariri formed a new unity government on Monday that includes two ministers from Syrian- and Iranian-backed Hezbollah.

Lebanon has been without a functioning government since Hariri led his coalition, backed by the United States and Saudi Arabia, to victory in a June parliamentary election against Hezbollah and its allies.

A government acceptable to all main parties is seen as key to maintaining stability in a country facing sectarian and political tensions, as well as a huge debt burden.

Finally, the government of national concord has been born, Hariri told reporters after agreeing the cabinet at a meeting with President Michel Suleiman at the presidential palace in Baabda on the outskirts of Beirut.

We have turned a page that we don't want to go back to and opened a new page that we strive to make a page of concord and work, he said.

French Foreign Minister Bernard Kouchner welcomed the formation of the Lebanese government and pledged the former colonial power's support for Hariri.

The formation of a new government was necessary to resolve the conflict that Lebanon was facing, to assure the security and stability of the country..., Kouchner said.

He urged the new government to push through economic reforms demanded by donors and implement U.N. Resolution 1701 that ended a 2006 war between Israel and Hezbollah.

U.N. Secretary-General Ban Ki-moon also welcomed the formation of a new government and called on it to recommit to the full implementation of Security Council resolution 1701.

The secretary-general hopes that Lebanese political leaders will continue to work together in a spirit of unity, dialogue and cooperation, his spokeswoman said.

Hariri spent more than four months brokering a deal with the opposition. A warming of ties between the two sides' main backers Syria and Saudi Arabia in recent weeks helped ease the rift in Beirut and led eventually to a power-sharing agreement.

The new 30-minister cabinet includes 15 ministers from Hariri's coalition, 10 from the opposition including two Hezbollah ministers, and five, including the key interior and defense portfolios, were nominated by President Suleiman.

The president's ministers in theory hold the balance of power in cabinet, with the Hariri coalition unable to gain a simple majority and the minority unable to block key decisions as they do not hold a third plus one votes in government.

Incumbents Ziad Baroud and Elias al-Murr kept their interior and defense portfolios.

Raya Haffar al-Hassan was appointed finance minister, responsible for managing Lebanon's public debt burden, while retired university professor Ali al-Shami was named foreign minister.

Mohammed Safadi kept his job as economy minister.

MANY CHALLENGES AHEAD

Hassan, who is close to Hariri, manages a United Nations Development Programme project aimed at supporting decision-making at the office of the prime minister.

Shami, 64, was named by close Hezbollah ally Parliament Speaker Nabih Berri. He will be the country's top diplomat when Lebanon takes over a seat at the United Nations Security Council at the start of next year.

The new government's first task would be to draw up a policy statement and present it to parliament for a vote of confidence.

Despite deep disagreements between the two camps on some crucial issues, such as the fate of Hezbollah's guerrilla army, the statement is expected to go smoothly and swiftly.

Hariri is then expected to visit Damascus and hold talks with Syrian President Bashar al-Assad in a move set to redraw the political landscape in Lebanon.

Hariri's coalition had accused Syria of assassinating statesman Rafik al-Hariri, Saad's father, in February 2005.

Syria denies any links, but the killing forced Damascus to end its 29-year military presence in Lebanon in April 2005 and led to the formation of a special court in The Hague to investigate and prosecute the killers.

Hopes are also high that Hariri, a billionaire businessman who is close to Saudi Arabia, and his government will tackle the country's economic woes.

Hariri said he looked forward to tackling the country's economic woes, public debt and its need to modernize government institutions.

Lebanon has largely shrugged off the effects of the global financial crisis but has public debt of around $50 billion.

(Additional reporting by Laila Bassam; Editing by Louise Ireland)

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