Mr Rutte's liberal VVD party and the centre-left Labour party secured the coalition deal after coming out on top in 12 September elections.

 

The previous coalition collapsed² after ministers failed to agree 16bn euros of cuts.

 

This new administration is seen as more pro-Europe and pro-austerity than the last one, our correspondent says.

 

Queen Beatrix swore in the new government at the royal palace in the The Hague, in a ceremony that was broadcast live on Dutch television and online for the first time.

 

The new coalition's motto is "building bridges", but the leaders have already warned voters that the new policies are going to be painful for everyone, the BBC's Anna Holligan reports from The Hague.

 

Both parties have tried to convince the public that in order to secure a stronger country in the future, they must make short-term sacrifices to get through the European financial crisis.

 

But this means an austerity package aimed at saving 16bn euros from the national budget by 2017.

 

September's election was called after the right-wing Freedom Party, led by the anti-European Geert Wilders, withdrew its support for Mr Rutte's budget cuts six months ago.

 

Mr Wilders' party took heavy losses in the election, while VVD claimed overall victory with Diederik Samsom's Labour Party coming a close second.