KIEV Ukraine's pro-Western governing coalition, rooted in the 2004 "Orange Revolution," was reinstated Tuesday after months of deadlock, with Prime Minister Yulia Tymoshenko likely to remain in her job.
The new, expanded governing team, announced in parliament, will have to grapple with the effects of the world financial crisis which has hit the ex-Soviet state's steel and chemical industries and battered its banks and currencies.
The announcement all but ruled out for now the notion of a snap election which has hung over Ukraine for months.
It also appeared to end serious wrangling between Tymoshenko and President Viktor Yushchenko, allies during the 2004 mass rallies against election fraud but since turned rivals.
Groups led by the two antagonists will be joined in the new coalition by a faction led by the assembly's new chairman, Volodymyr Lytvyn.
"This coalition has recently looked far from likely and it will have to withstand the test of events," said independent analyst Oleksander Dergachyov.
"It cannot be viable unless there are changes in the relationship between Yushchenko and Tymoshenko."
Lytvyn announced the restoration of the coalition minutes after being elected to his post with backing from 244 members of the 450-seat assembly. The coalition can theoretically command up to 258 seats, though in practice it will be somewhat smaller.
Lytvyn, who earned a reputation as a skilled negotiator while parliamentary chairman from 2002 to 2006, said he saw few reasons to choose a new premier.
"We have a government, we have a prime minister," Lytvyn told journalists after announcing the coalition.
"Clearly, there will be proposals from the coalition on the make-up of the government. I see no legal grounds for substantial changes in the government and, first and foremost, the prime minister."
WEAK CURRENCY, BATTERED INDUSTRY
Ukraine has secured a $16.4 billion loan from the IMF. Its banking system is shaky, its currency plunging and its economy dependent on increasingly expensive energy from Russia, with which relations have deteriorated sharply since Yushchenko was swept to power by the 2004 protests.
Tim Ash, head of CEEMEA research at Royal Bank of Scotland, said a new government may not be enough to tackle the crisis.
"I would argue that you need a government to legislate -- so that's positive," he said. "But the focus is on the central bank which is not driven by the government. It's driven more by Yushchenko."
The expanded coalition surprised many as Tymoshenko's bloc had been in talks with the Regions Party of ex-prime minister Viktor Yanukovich -- the main target of the 2004 protests.
Yushchenko had denounced any notion of a coalition involving the politician he defeated in the contested presidential election which sparked the "Orange Revolution."
"This coalition was possible only because it is a lesser evil for the president than one between Tymoshenko and the Regions Party," said Volodymyr Fesenko of the Penta think tank.
Analysts said Tymoshenko almost certainly would have secured guarantees that she would remain in the job.
Parliament had been all but deadlocked since September when the president's Our Ukraine party walked out of its alliance with the premier's bloc after months of rows.
The president initially tried to resolve the conflict by dissolving the chamber and calling a snap election, but parliament and the government refused to finance the poll and in the face of the world financial crisis, he shelved the idea.
(Additional reporting by Pavel Polityuk and Sabina Zawadzki)
(Editing by Richard Balmforth)