The stakes could not be higher, analysts say. The International Monetary Fund's reputation, Habibie's political survival and the threat of complete economic meltdown in Indonesia all rest on the success of their relationship.

Indonesia desperately needs dollars to get its bankrupt companies working again and keep the spectre of sovereign default at bay. But the IMF has suspended payments of a $10 billion loan, the central plank of a $41.2 billion rescue package.

The IMF's top Asia expert Hubert Neiss is due to fly to Jakarta this week to review the situation.

Habibie must perform a delicate balancing act, keeping international lenders happy enough to inject funds into Indonesia while trying to soften the blow on ordinary Indonesians of the requisite economicchanges.

Analysts are not confident on his chances of success.

"It's not easy to find someone with less credibility than Suharto," said one. "But in Habibie, Indonesia has managed to come up with one."

Habibie is regarded as fiscally profligate, economically naive and fond of the kind of high-spending projects that are anathema to the IMF. When he was first mooted as vice president in January, anxious investors responded by sending the rupiah plunging to an historic low of 17,000 to the dollar.

"His credibility starts from zero. He has to build it from scratch and do all the right things in relation to the IMF's prescriptions if he is to last longer than the three to six months that most observers are giving him," said Sani Hamid, an analyst at MMS International in Singapore.

The IMF's reform package will have to be renegotiated, largely because its underlying economic assumptions are no longer attainable in the wake of the political upheavals and devastating riots.

But while Indonesia's economictargets will be rewritten, the structural reforms demanded by the previous package will still have to be implemented, analysts say.

These include curbing energy subsidies, scrapping a number of infrastructure projects, restructuring the banking and corporate sectors and breaking up monopolies and cartels.

Some reforms will be painful for Habibie to swallow.Indonesia removed fuel and energy subsidies at the start of May, sparking rioting in the Sumatran city of Medan which marked the start of the wave of violence which helped bring Suharto down. Suharto cut back some of the price rises in a vain bid toturn the tide of opposition. Habibie, who took over on Thursday, faces the task of removing the subsidies for good, without turning the country against him.

Habibie's pet project, state aircraft maker Industry Pesawat Terbang Nusantra (IPTN) presents another problem.

The IMF has demanded an end to government support for the company, and while government funding was withdrawn earlier this year, analystshave noted that a $2 billion project to develop a new passenger aircraft is likely to need government support.

The project is officially under review. But analysts say Habibie may be loath to pull the plug on it.

Habibie does have some bargaining counters. The IMF is sensitive about accusations that its bitter medicine helped worsen hardship and fuel unrest in Indonesia, and is likely to be flexible, analysts say. Most expect a gradual removal of fuel subsidies rather than a repeat of the sudden move that sparked the Medan riots.

"The international community -- the IMF and the rest -- will have to realise that this is not a textbook situation. This is a situation where they have to show flexibility," Hamid said.

But negotiations on public expenditure are seen as a likely sticking point. "It's in the interest of both sides that they introduce reform in a method that as much as possible does not increase people's hardship, although there is obviously going to be more hardship," said a Jakarta-basedanalyst, who asked not to be named.

"The main problem I would see would be negotiations on public expenditure. Habibie is the most fiscally irresponsible person you could find," he said.

"The real potential for disagreement will be on curtailing public projects," he said. "Controlling public expenditure is going to be a serious area of dispute.

"Unlike Habibie, Indonesia's top economics minister Ginandjar Kartasasmita is widely respected by markets. Analysts say a key factor in the success of the talks is whether the economic team is allowed more independence than under Suharto. "The crucial question is how much independence Habibie is going to give his economic team in negotiations with the IMF. If they do negotiate a pragmatic agreement with the IMF, is Habibie going to wreck it?," the Jakarta-based analyst asked. "Knowing the kind of individual he is, I'm not sure he'll be able to contain himself. He's not given to accepting alternative opinions. He's always had his own way in the past. Now he has tocompromise in a way he's never had to."