Austria's Social Democrats and the conservative People's Party have agreed a new coalition, keeping the far-right Freedom Party out of government.

The deal breaks a three-month stalemate in negotiations.

Both parties agreed a joint policy programme - reportedly including a number of the People's Party's key election pledges, including a potentially-controversial pension reform.

Chancellor Viktor Klima said the Social Democratic party executive had unanimously backed the new coalition, despite union opposition to pension reform.

"Chancellor Klima is authorised to form a joint government with the People's Party," a statement said.

The deal was also approved by the People's Party, led by Foreign Minister Wolfgang Schuessel, who had pledged to go into opposition.

Without a deal, the likely outcome would have been another election, in which Joerg Haider's Freedom Party was expected to further increase its share of the vote.

The party, which campaigns against immigration, soared into second place in last October's election and is currently riding high in the opinion polls.

Its success has caused international controversy, not least because Mr Haider has in the past claimed to admire Adolf Hitler's employment policies.

In the election, the Social Democrats remained the largest party with 65 seats, with the Freedom Party and the People's Party on 52 each and the Greens 14.

Many political analysts doubt the new coalition will survive a full four-year term, because of disagreements over pledges by trade union leaders to resist pension reform.

"How long can something that starts like this last? Sceptics would say not long," Der Standard newspaper said in an editorial comment.

Coalition doubts

The People's Party warned that the deal could not be renegotiated to satisfy union demands and insisted that it should be given one of the key ministries traditionally held by the Social Democrats - finance or social affairs.

Chancellor Klima is expected to announce the allocation of ministerial posts on Friday after further talks with Mr Schuessel.

The new government programme is not yet known but is expected to follow a conservative line involving substantial reform of Austria's heavily-regulated economy.

Greens leader Alexander van der Bellen said the Social Democrats had sacrificed their principles for the sake of remaining in power.

Mr Schuessel had been under pressure from some in his party to join a coalition with the Freedom Party.

But President Thomas Klestil, fearing damage to Austria's international reputation if the Freedom Party entered government, had pushed for a continuation of the ruling coalition.