Designated Tunisian Prime Minister Elyes Fakhfakh proposed the lineup of a new government on Saturday and then said negotiations would continue after the Ennahdha party, the biggest in Parliament, rejected it.

The proposed government must be approved by the deeply fragmented parliament in two weeks or there will be a new election.

Fakhfakh submitted a list of cabinet nominees to President Kais Saied, with Nizar Yaich as finance minister, Nourredine Erray as foreign minister and Imed Hazgui as defence minister.

But with the largest parties either opposed to his coalition or unenthusiastic about its composition, Fakhfakh may struggle to gain the strong parliamentary majority needed for any significant political programme.

The Islamist Ennahdha party, with 53 seats, said it would only join a unity government that brings together parties from across Tunisia's political spectrum.

"Ennahdha's decision will put the country in a difficult situation," said Fakhfakh.

Qalb Tounes or Heart of Tunisia, the second-biggest party with 38 seats, also said it would not back the government after the prime minister-designate excluded it from the coalition.

Fakhfakh, a former finance minister, was tasked by Tunisia's president with forming a government after a previous list proposed by Ennahdha's nominee for prime minister, Habib Jemli, was rejected by Parliament in a confidence vote last month.

If Fakhfakh's proposal is also rejected by Parliament next week, a new parliamentary election must follow within three months.

"Ennahdha has decided not to take part in the government or in a vote of confidence," senior Ennahdha member Abdelkarim Harouni told the AFP news agency.

Fakhfakh had already promised to name a government that would draw only from parties he considered aligned with the goals of Tunisia's 2011 revolution and committed to rooting out corruption.

Elections in September and October returned Saied, a political independent, as president, and a parliament in which Ennahdha held fewer than a quarter of the seats.

Tunisia faces a series of long-term economic challenges which threaten to undermine public trust in the young democracy, and which demand political decisions that could be unpopular.

Since the revolution, unemployment has been high and growth low, while the government has sunk further into debt with a series of big budget deficits that foreign lenders demand it bring under control.