The first peacetime coalition in Britain in nearly 80 years hails an era of further realignment in British politics, which reflects the change in national and international priorities for the European nation since the ending of the Cold War.
The idea of a coalition between the right-of-center Conservatives and the left-of-center Liberal Democrats would have been unthinkable even five years ago.
It takes place against the same social and political changes over the past 40 years that have seen the Labour party move away from its strong socialist roots to a more managerial style under Tony Blair.
Britain's Conservatives traditionally feel they are born to rule and, for the past 30 years or more, they have also carried with them considerable right-wing ideological baggage in areas like the economy, public services, education, defence, and social issues.
Their defeat in three general elections at the hands of Tony Blair's New Labour concentrated their minds and led to David Cameron's selection as leader, his reshaping of policies and directions and his eventual arrival in Downing Street as prime minister.
The confrontational attitudes of Cameron's predecessors, notably Margaret Thatcher and her supporters during the 1980s and 1990s, have in part been abandoned or ignored. The Conservatives' poor record on social inclusion and race may well be revised in the new government, but their pro-business and lower-tax agenda remains.
Cameron has moved a little towards the center of British politics and a greater inclusiveness, which the Thatcher governments never aspired to or achieved. Cameron has gone out of his way to explicitly oppose Thatcher's famous slogan "there is no such thing as society."
In his first speech as prime minister to the media in Downing Street, Cameron used the same formula of words that he had used on several occasions during the campaign.
He said: "I want to help try and build a more responsible society, one where we don't just ask what are my entitlements but what are my responsibilities, one where we don't ask what am I just owed but more what can I give, and a guide for that society that those that can should and those who can't we will always help."
"I want to make sure that my Government always looks after the elderly, the frail, the poorest in our country."
Conservative economic inclinations and policies remain pro-business and in favor of less government and lower taxes. The coalition will not hinder them in this area, and the appointment of George Osborne, Cameron's right-hand man and an economic rightwinger, as chancellor of the exchequer (finance minister) indicates the track of future policy.
Another key appointment also reveals the shape of future policy. Former leader William Hague becomes foreign secretary. Hague is a rightwinger, a party heavyweight, and is skeptical about the extent of Britain's involvement in the European Union and other European institutions.
NATO, the "special relationship" with the United States, and an independent, strategic nuclear capability will be the key pillars of British foreign policy outside EU affairs under Hague.
He will find like-minded support from defence secretary and fellow right-wing Conservative Liam Fox. Under Fox, the present trans-atlantic focus of foreign policy will remain as well as the commitment to the war in Afghanistan.
The foreign office will move to a more central role in British policy, and there is also likely to be more cross-department cooperation on areas like defense, foreign relations and foreign aid.
Within the EU, the coalition agreement follows the Conservative line and rules out any further transfer of powers from the British parliament to the EU without a referendum. It also further underlines the position the Conservatives reached some time ago that they would not roll back decisions taken on the EU by the Labour government.
In domestic affairs, the Liberal Democrats have secured agreement for a referendum on electoral reform, and policy on fixed-term parliaments and reform of the House of Lords.
Conservative Theresa May becomes home secretary, giving her party a clean sweep of all the most important government jobs, home affairs, foreign affairs and finance.
The parties have agreed to structural reform to the banking system in the wake of the global financial crisis, and to follow the Conservative election promise of cutting public spending immediately in order to tackle the record budget deficit.
Hague told the BBC in an interview on Wednesday, "Across the whole programme of deficit reduction, tax reform -- with the exception of married tax allowance -- immigration, major political reforms and constitutional change, on pensions and welfare, on the rest of education policy, civil liberties and the environment, we have reached true collective agreement."
The Liberals, the ancestors of today's Liberal Democrats, were last in government in 1945, and this coalition, and their substantial place in it together with many elements of policy and five members of the 20-plus Cabinet, is an historic moment for them and for the country's politics.
It remains to be seen if the left-of-center Liberals and the right-of-center Conservatives can make this marriage one that will not end in an early divorce.
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