The last government collapsed in February and talks on a new coalition have dragged on for months. That left a caretaker Cabinet to deal with the budget, deepening fears about the political risks posed by economic stagnation, a policy vacuum and lingering effects of the credit crisis.

Queen Beatrix told Parliament the country's deficit was unsustainable and its social cohesion was under threat.

But one of the key players in the formation of the new government praised Tuesday's budget.

"This (budget) is a good first step. Usually outgoing cabinets make the next budget without new policy, but this government does more because they are cutting expenses," Frans Weekers, the financial spokesman for the Liberals, told Reuters.

The Liberals, the Christian Democrats and the anti-Islamic Freedom Party have been in on-and-off coalition talks for more than a month. There are hopes they could reach a deal by mid-October on a minority Liberal-Christian Democrat cabinet with the Freedom Party's parliamentary support.

They have been targeting budget cuts of 18 billion euros over their potential four-year term in order to balance the budget by 2015. Finance Minister Jan Kees de Jager - a Christian Democrat - said on Tuesday they could potentially balance the budget by that time with just 15.2 billion in cuts.

Weekers said he was not sure if fresh cuts could be made by the new government in 2011 on top of what was announced on Tuesday, and De Jager agreed it would be difficult to implement fresh spending reductions next year.

Among the key spending measures in the 2011 budget are 100 million euros in cuts to integration programs for immigrants and 120 million in cuts for work retraining programs. In total, the government expects revenue of 235 billion euros and plans to spend 254.7 billion euros.

The 2011 budget envisages a deficit of 3.9 percent of gross domestic product, down from 5.8 percent this year. It also sees GDP growth of 1.5 percent during the year, unemployment at 5.5 percent and inflation at 1.5 percent. The figures were leaked to Dutch media last week.