Mr Fogh Rasmussen handed in his resignation to Queen Margrethe earlier on Sunday, a day after NATO members chose him to succeed Jaap de Hoop Scheffer when the Dutchman's tenure as NATO leader ends on July 31.

'My mandate as prime minister marks no change in the country's foreign policy,' Mr Loekke Rasmussen told reporters after being formally confirmed as prime minister by the figurehead monarch.

'What Denmark now needs is a steady hand on the steering wheel.' Mr Loekke Rasmussen and Mr Fogh Rasmussen, who are not related, are members of the Liberal Party, which governs in a coalition with the Conservatives. The centre-right minority government is backed in Parliament by the nationalist Danish People's Party.

NATO leaders on Saturday appointed 56-year-old Fogh Rasmussen as NATO's new secretary-general after overcoming Turkish objections to a leader who angered Muslims around the world by supporting the right to caricature the Prophet Muhammad.

Mr Fogh Rasmussen, known as a deft negotiator, has led a minority government since 2001, and helped raise Denmark's profile with a strong commitment to European Union cooperation and trans-Atlantic ties.

Mr Loekke Rasmussen, 45, said he would retain the Finance Ministry portfolio until a government shuffle, expected after the Easter break.

Appointed finance minister after general elections in November, Mr Loekke Rasmussen was one of the architects behind a 61.4 billion kroner (S$16.75 billion) package to help Danish companies during the financial crisis.

He was also instrumental in providing 100 billion kroner in government loans for banks and mortgage lenders, and guarantees for interbank deposits.

He joined the government in 2001 as interior and health minister, and headed a complex reform that trimmed Denmark's 271 municipalities to 98, and abolished the 14 counties to replace them with five regions. -- AP