Nov. 10 (Bloomberg) -- Lebanon’s Saad Hariri was confirmed as prime minister of a national unity government after unveiling a list of cabinet nominees he said covers the political spectrum.

Hariri, 39, prime minister-designate since elections in June, heads the ruling pro-Western coalition and is Lebanon’s leading Sunni Muslim politician. He presented his cabinet list yesterday to President Michel Suleiman, a Maronite Christian, who declared the new government by decree.

“A national unity government has been born,” Hariri said in comments broadcast live on Lebanese news channels. “This cabinet will either be a chance for Lebanon to renew trust in its institutions, or it will be a stage where Lebanese will repeat their failure in achieving agreement. I will work hard and cooperate with everyone.”

Hariri submitted his first list of ministers in September. Suleiman asked him to make a second attempt when his choices were rejected by the opposition, made up of the Shiite Muslim Hezbollah and Amal movements and the Christian Free Patriotic Movement.

Hariri’s coalition defeated Hezbollah and its allies in the June 7 parliamentary vote. His coalition won 71 seats in the 128-seat parliament to the opposition’s 57.

The 30 nominees on his new list came from across the range of Lebanon’s politics, Hariri said after meeting with Suleiman late yesterday.

Splitting the Cabinet

Hariri’s coalition has the right to 15 ministers. Ten will be loyal to Hezbollah and its Christian allies, with Suleiman choosing the other five. That holds to a formula agreed to in July that gives neither Hariri’s March 14 coalition a decisive majority nor Hezbollah and its allies veto power, which they had in the outgoing government.

The new formula restores some of the power that the presidency lost after the 1989 Taif accords, which ended Lebanon’s 15-year civil war and gave some of the president’s powers to the prime minister and cabinet.

Under Lebanon’s power-sharing system, the president has to be a Maronite Christian, the prime minister a Sunni Muslim and the parliament speaker a Shiite Muslim.

Defense Minister Elias Murr and Interior Minister Ziad Baroud, both appointed by Suleiman, retained their positions in the new cabinet. Raya Hafar was appointed finance minister, replacing Mohamad Chatah. Ali al-Shami replaced Fawzi Salloukh as foreign minister.

Hezbollah’s Portion

Former Lebanese Army General Michel Aoun, a Christian member of the Hezbollah-led opposition, had in the previous negotiations asked Hariri to give seven members of his bloc ministerial positions. He insisted on the Telecommunications Ministry or the Finance Ministry. Aoun’s bloc, with 27 seats, is the biggest Christian group in parliament.

Aoun’s bloc got five positions, including the energy and water ministry for his son-in-law, Gebran Bassil. Fady Abboud becomes tourism minister, Youssef Saadeh state minister, Ibrahim Dedian industry minister and Charbel Nahhas telecommunications minister.

“The most significant aspect of this cabinet formation is that the opposition and Aoun in particular managed to extract concessions such as the telecoms ministry and the appointment of his son-in-law,” said Amal Saad-Ghorayeb, author of a forthcoming book, “The Iran Connection: The Alliance with Syria, Hezbollah and Hamas.”

Challenge Over Guns

One challenge facing the new government is how to accommodate Hezbollah’s demands to keep its arms. The group fought a monthlong war with Israel in 2006.

The disarmament of Hezbollah, a proposal that has increased sectarian tensions, should be part of a national dialogue, Hariri and his allies have said.

A cabinet statement that is drafted with the forming of every new government is the next step for Hariri. It sets the new government’s agenda and will be a reflection of the cabinet’s dualism, Saad-Ghorayeb said.

“For Hezbollah to ensure in the cabinet statement its right to resist and bear arms against Israel is less a matter of substance than it is of form,” she said.

“If there was a decision to confront Hezbollah over its arms it would be made by external actors like the U.S. and Israel,” Saad-Ghorayeb added.

Hezbollah insists its weapons are necessary to protect Lebanon from Israel and to gain control of the Shebaa Farms, a 25-square-kilometer (10-square-mile) area on the border between Lebanon and the Golan Heights that Israel has occupied since 1967. Israel captured the territory from Syria in the Six Day War. It is now claimed by Lebanon.

1982 Invasion

Israel, which invaded Lebanon in 1982 and pulled its forces out of most of southern Lebanon in 2000, said the status of the remaining territory should be determined in negotiations.

The U.S. “looks forward to working with the next Lebanese government on behalf of the people of Lebanon,” White House Press secretary Robert Gibbs said in an e-mailed statement. “We hope that the cabinet statement and government program will reflect a commitment to full implementation of UN Security Council Resolutions.”

Public Debt

Lebanon’s new government will have to reduce the country’s public debt, which was $48 billion at the end of July, or about 162 percent of last year’s gross domestic product, a figure swollen by reconstruction costs after the end of a 15-year civil war in 1990 and the war with Israel in 2006. About $21.3 million of the total is foreign debt.

“The formation of a government will strengthen sentiment and further improve the economic environment,” Philippe Dauba- Pantanacce, a senior economist at Standard Chartered, said in an e-mailed report today. “In Lebanon, political stability is particularly crucial to GDP growth, as domestic consumption, confidence in the banking sector, investments by overseas Lebanese, and tourism are the largest contributors to GDP.”

Moody’s Investors Service raised Lebanon’s local and foreign currency bond ratings by one level to B2, five levels below investment grade, on April 1. Standard & Poor’s rates Lebanon’s debt at B-, six levels below investment grade.

To contact the reporter on this story: Massoud A. Derhally in Beirut at mderhally@bloomberg.net.

Last Updated: November 10, 2009 10:52 EST