CAIRO (Reuters) - The makeup of a new Egyptian government is likely to be decided by the middle of next week, a presidential spokesman said on Wednesday, a day after the new prime minister was named by President Mohamed Mursi.

Irrigation and Water Resources Minister Hisham Kandil was designated as premier on Tuesday but some critics questioned whether the little-known technocrat had the political or economic experience for the job.

"Negotiations over the formation of the new government will end by the middle of next week," Yasser Ali told reporters.

"A statement will be issued soon or maybe tomorrow about what was achieved with regard to the formation of the presidential team," Ali added, in reference to talks to appoint Mursi's deputies and advisers.

Investors had been hoping for a premier able to tackle Egypt's urgent economic problems. The main index declined to a 1.5 percent close for the second day on investor skepticism about Kandil's political and economic experience.

Mursi himself was sworn in three weeks ago. The time it had taken him to name his prime minister underlined how Egypt is struggling to turn the new political freedoms brought by the overthrow of Hosni Mubarak in a popular uprising a year and half ago into an effective government.

Mursi, a Muslim Brotherhood politician and the country's first freely elected civilian president, is seeking to stamp his authority on a state where the military that assumed power from Mubarak still looms large.

Highlighting the continued influence of the generals, Kandil said Mursi was in contact with them on the choice of the new defense minister, a post currently held by Field Marshal Hussein Tantawi, who held the post for 20 years under Mubarak.