Kurz's govenrment was embroiled in a scandal involving his former coalition partner, far-right Freedom Party, that brought down the government in May.

The left-wing swing by Kurz towards the Greens is also a sign that climate action has taken political centre stage in Europe.

The governments in Sweden, Finland, Lithuania and Luxembourg also include the Greens, but in a more junior role.

"We succeeded in uniting the best of both worlds," Kurz said on Wednesday standing alongside Greens leader Werner Kogler.

The pair will become chancellor and vice chancellor, and the Greens will control just four of 15 ministries.

Kurz's party will control the finance, interior, defence and foreign ministries, while the Greens will take charge of a revamped ministry including environment, transport, infrastructure and energy, and also head the justice ministry and social affairs.

Kurz's Austrian People's Party (OVP) won with 37.5 percent of the vote while the Greens came in fourth with 13.9 percent in September.

"It is possible to reduce the tax burden and to ecologise the tax system," Kurz said hinting at the content of the agreement, which is to be unveiled later on Thursday (2 January).

"On climate change we have possibly agreed on more than we could have imagined beforehand," Kogler said, adding that "Austria should become a European and international leader on climate change issues".

Kurz's OVP will have to deliver on climate for the Greens for them to stick to the coalition, as many among the Greens oppose Kurz and his hardline migration policy.

Migration can be expected to cause friction among the coalition partners, as it will remain a key issue for Kurz's constituency, some of whom view the Greens with distrust.

Green template

The "experiment" - as the new coalition was dubbed by the newspaper Kurier - brings the left-wing environmentalist party into the government for the first time in Austria, and could serve as a model for a new federal coalition in Germany.

The 33-year-old chancellor first took a chance by aligning his government with the far-right in 2017, as voters across Europe increasingly opted for parties outside of the traditional mainstream.

But after the 'Ibizia-video' scandal involving the far-right leader toppled the government, Kurz opted for another party outside of the mainstream, but this time on the left.

As climate change action becomes increasingly-unavoidable politically, Kurz's choice might be seen as a template for other parties in power in forming new coalitions.

The next government in Berlin could see a similar alliance as the Greens, now polling at 21 percent, could supersede the ailing Social Democrats as German chancellor Angela Merkel's Christian Democrats' future partners.

A recent Forsa poll put the SPD at 11 percent, with Merkel's CDU at 28 percent, and the far-right Alternative for Germany (AfD) at 14 percent.

Elections are only due in 2021, but a collapse of the current coalition government could bring the Greens into power earlier.