WRAPUP 10-New UK leaders say coalition will rebuild economy

* First coalition since 1945 pledges “strong, stable” govt

* New PM Cameron: “Historic, seismic shift” in UK politics

* Deputy leader Nick Clegg says must rebuild economy

* New Foreign Secretary William Hague to visit Washington

(adds Hague, Miliband, updates links)

By Estelle Shirbon

LONDON, May 12 (BestGrowthStock) – Britain’s new Prime Minister
David Cameron said on Wednesday the country’s first coalition
government since 1945 would be strong enough to survive a full
five-year term and tackle the worst economic crisis in decades.

Cracking jokes with his new deputy Nick Clegg, leader of the
third-placed Liberal Democrats, Cameron hailed a “historic and
seismic shift” in British politics as he sought to bury their
old rivalry.

With Britain emerging from its worst recession since World
War Two, the new coalition must find a way to cut a budget
deficit running at more than 11 percent of GDP.

“No government in modern times has ever been left with such
a terrible economic inheritance,” Cameron told reporters in the
garden of 10 Downing Street, the prime minister’s official
residence.

“We know there will be difficult decisions ahead. (The
coalition) can be an historic and seismic shift in our political
landscape.”

At an open-air news conference, Cameron and Clegg stood
side-by-side and forgot the animosity and insults of the
close-fought election campaign, laughing at each others’ jokes
and using first names. [ID:nLDE64B28E]

Hailing a new era of British politics, Clegg said: “We need
to rebuild not only the public finances but we also need to
rebuild the British economy on new sustainable foundations out
of the rubble of the old economy.”

The two sides agreed earlier on Wednesday to form a
coalition after an inconclusive election last Thursday ended 13
years of rule by the centre-left Labour Party under Tony Blair
and his successor Gordon Brown.

NEW POLICY PROGRAMME

Despite big differences on policies as varied as tax,
immigration and nuclear weapons, the parties said they had
agreed a policy programme that will be stable and lasting.

The coalition adopted Conservative plans to cut 6 billion
pounds ($9 billion) of spending this financial year, earlier
than the Liberal Democrats wanted. [ID:nLDE64B23L]

“There is going to be a significant acceleration in the
reduction of the structural budget deficit,” new finance
minister George Osborne told reporters. [ID:nLDE64B1L3]

Britain’s financial markets had mixed fortunes as relief
about the coalition deal was tempered by concerns about the
harsh austerity measures that lie ahead. [ID:nLDE64B0V3]

The coalition has yet to convince sceptics that it will have
the strength and longevity to overhaul the economy.

“I still don’t think it will last,” said David Lea, western
Europe analyst at Control Risks, a consultancy. “The differences
between the parties are just too great.”

Former Conservative deputy leader William Hague is the new
foreign secretary. He is expected to hold talks with U.S.
Secretary of State Hillary Clinton in Washington on Friday.
[ID:nLDE64B2RQ]

Former finance minister Ken Clarke will run the justice
department, while Lib Dem Vince Cable, a former economist, is
the new business secretary in a cabinet that includes five
positions for coalition’s minor partner. [ID:nLDE64B21R].

Cameron, a 43-year-old former public relations executive,
is Britain’s youngest prime minister in almost 200 years. He
took over the position after Brown admitted defeat in efforts to
broker a deal with the Lib Dems.

David Miliband, until Wednesday Britain’s Foreign Secretary,
became the first to declare himself a candidate to replace Brown
as leader of the Labour party, now in opposition.
[ID:nLDE64B28F]

Legislation will be introduced to give parliaments five-year
fixed terms. However, parliament could still be dissolved if 55
percent or more of the House votes in favour.

The coalition’s plans also include:

– Introduction of a banking levy;

– A commission to investigate the possibility of separating
retail and investment banking;

– Plans to give Bank of England a direct role in measures to
tackle long-term threats to financial stability and a watching
brief over day-to-day bank supervision

– Raising non-business capital gains tax to bring it close
to income tax levels;

– A cap on immigration from outside the European Union.
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For an overview of election stories [ID:nUKVOTES]

For multimedia coverage, see http://r.reuters.com/quq44j

Graphic of gilt and stg reaction http://r.reuters.com/nec23k

Graphic of results http://r.reuters.com/hym23k

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Stocks

(Additional reporting by Rhys Jones, Tim Castle, Peter
Griffiths, Michael Holden and Adrian Croft; editing by Philippa
Fletcher)

WRAPUP 10-New UK leaders say coalition will rebuild economy