The 43-year-old Cameron became Britain's youngest prime minister in nearly 200 years following the resignation of Gordon Brown.

Conservative leader David Cameron took over as British prime minister on Tuesday after securing a power-sharing agreement between his center-right party and the smaller Liberal Democrats.

The Lib Dem leader Nick Clegg, who was thrust into the position of kingmaker after last Thursday’s inconclusive election, was appointed deputy prime minister hours later.

Gordon Brown had resigned as prime minister earlier after his center-left Labour Party’s own attempt to clinch a deal with the Lib Dems failed. Labour had been in office for 13 years, first under Tony Blair and then Brown.

The Conservatives won most seats in a parliamentary election last week but fell short of a majority. Labour came second and the Liberal Democrats a distant third.

Giving his first speech as prime minister, Cameron, 43, said he aimed to form Britain’s first coalition government since 1945. It faces the immediate challenge of a huge budget deficit which financial markets are anxious to see tackled.

“This is going to be hard and difficult work. A coalition will throw up all sorts of challenges. But I believe together we can provide that strong and stable government that our country needs,” Cameron said, his pregnant wife Samantha by his side.

Cameron is the youngest prime minister in almost 200 years.

The exact shape of the new government was not yet clear and Liberal Democrat legislators were meeting late on Tuesday to give their final approval to the deal on offer from the Conservatives.

FIVE LIB DEMS IN CABINET

The prime minister’s office announced late in the evening there would be five Liberal Democrats in cabinet in total, including Clegg.

First among the new government’s challenges will be how to reduce Britain’s record budget deficit, which is running at more than 11 percent of national output and has raised fears that the country could lose its triple-A credit rating.

Britain’s sterling currency rose against the dollar and the euro as Cameron took office. Markets were impatient to see an end to the uncertainty thrown up by the election.

A Conservative source said the two parties had agreed to significantly accelerate deficit reduction plans. The focus would be more on cutting public spending than on raising taxes.

Another Conservative source said George Osborne, a close friend and ally of Cameron, would become the new chancellor of the exchequer, or finance minister.

Some in the finance industry have expressed doubts about Osborne because he is untested and takes over an economy emerging from the worst recession since World War Two.

The Conservative source said William Hague, a former Conservative leader and one of the main negotiators with the Lib Dems, would be the foreign minister.

Both the Conservatives and Labour had tried to win Lib Dem support to form the next government during five days of intense negotiations, but it became clear on Tuesday afternoon that Labour had lost and Brown would have to resign.

“I wish the next prime minister well as he makes the important choices for the future,” an emotional Brown, 59, said earlier in front of the prime minister’s residence at 10 Downing Street, flanked by his wife Sarah.

Brown, his wife and their two children briefly posed for photographers after his farewell remarks, before leaving Downing Street. Brown then went to Buckingham Palace where Queen Elizabeth accepted his resignation.

Shortly afterwards, it was Cameron’s turn to visit the queen, who formally asked him to form a government in her name. He went straight from the palace to Downing Street to deliver his speech.

U.S. President Barack Obama called Cameron to congratulate him, the White House said. Cameron also received congratulations from German Chancellor Angela Merkel and French President Nicolas Sarkozy. — REUTERS