* Islamist party Ennahda agreed handover in deal last year
* Tunisia's compromise praised as model for region
* Economic reforms, militants key challenges for new PM
By Tarek Amara
TUNIS, Jan 29 (Reuters) - Tunisia's new caretaker government formally took office on Wednesday, replacing the Islamist party which came to power after a 2011 uprising but stepped down in a deal intended to help the country embrace democracy.
Three years after the uprising against autocrat Zine el-Abidine Ben Ali inspired revolts across the region, Tunisia on Monday adopted a new constitution, and a technocrat government has taken over until elections this year.
Compromise between Tunisia's Islamist party and their secular opponents to end months of deadlock contrasts with the messy paths taken in neighbouring Libya and Egypt, which are still struggling with turmoil and violence.
Former premier Ali Larayedh, an Islamist who spent years in prison under Ben Ali, formally handed over to Prime Minister Mehdi Jomaa, a technocrat who asked for support to bring stability to the country that started the Arab Spring.
In a transition widely praised as a model, the ruling Islamist party Ennahda and its secular opposition set aside differences to allow Jomaa's caretaker government to lead until the elections.
"It's great to see power in Tunisia passed on in such a beautiful way and with sincere smile," Jomaa said referring to Larayedh, an often serious-faced premier who smiled broadly at the moment he handed over the government.
Jomaa, who once ran an aerospace parts company in Paris, has named a non-political cabinet that must decide how to tackle a large budget deficit and the threat of Islamist militants whose presence has grown since the uprising.
Divisions over the role of Islam emerged after the revolution, but the assassination of two opposition leaders last year tipped the country into a crisis that eventually pushed Ennahda to compromise over its rule.
Political splits are still present, but Tunisia's leaders, heavily reliant on tourism for its foreign income, and with no tradition of violence or military interventions, opted to battle at the ballot box, not on the street. No election date has been set.
"Ennahda handed over power for the benefit of our country, you cannot see this kind of thing every day in our region," Rached Ghannouchi, leader of Ennahda, told Reuters. "We proved that we want consensus and democracy."