Party systems provide the essential structure of the coalition bargaining environment. Stability in party systems ensures the presence of regularities that can be observed in government formation, but most empirical research focuses on established democracies. In new democracies, party systems are less institutionalized, which means that interactions between parties can be unpredictable and has significant implications for coalition formation. This article presents the first study of coalition formation in new democracies that employs an empirical design comparable to that of the leading research on Western Europe. The author uses a new data set of potential coalitions in Central and Eastern Europe to examine three explanations for government formation that arise when party systems are weakly institutionalized. The results show first that incumbency is a disadvantage for governments in new democracies when formation occurs postelection. This disadvantage is due to high levels of electoral volatility caused by policy failure and clientelistic practices. Incumbents are advantaged when formation takes place midterm, as weak party system institutionalization leads to an inchoate pattern of interaction between opposition parties, which therefore fail to provide a viable alternative. Second, the presence of former dominant parties influences government formation by stifling the development of programmatic competition. Instead, programmatic competition is subjugated to contestation based on historical enmities. And third, established parties collude to exclude new parties from coalition formation—a possible indicator that a party system is becoming more institutionalized. The article provides new insights into the importance of routinized and stable political practices and institutions.