On the same day in Greece, neo-Nazis entered the country’s parliament after national elections that wiped out mainstream parties that had supported austerity measures imposed by the EU.
Accepting his mandate as French president, Mr Hollande threw down the gauntlet to Angela Merkel, the German chancellor, who has made austerity policies a condition of euro membership.
“Europe is watching us. The moment that I was announced president, I am sure in many European countries there was a relief, hope at the idea that at last austerity is no longer inevitable, and my mission is to give to European construction the dream of growth,” he said.
“Europe is watching us, austerity can no longer be the only option.”
His words, just after inflicting a humiliating defeat on Mr Sarkozy, previously the Chancellor’s closest ally, are a call to arms against the economic policies that Germany has enshrined in a eurozone “fiskalpakt” treaty.
Mrs Merkel was quick to call and congratulate Mr Hollande, inviting him to Berlin “as soon as possible” for talks.
“It is a thunderclap for Europe,” said Arnaud Montebourg, a senior Socialist likely to enter the Cabinet. “This shows that the Europe of austerity must be turned into a Europe of growth.”
Ed Miliband, the leader of the Labour Party, also hailed the French Socialist victory as a development that would weaken the Conservative-led coalition.
“This new leadership is sorely needed as Europe seeks to escape from austerity. And it matters to Britain,” he said.
Greek elections have also delivered a hammer blow to the eurozone’s austerity policies after over 60 per cent of the vote went to far-Left and Right-wing parties opposed austerity measures that are a condition of an EU-IMF bail-out and Greek membership of the euro.
In Greece, it appeared last night that centrist New Democracy and Socialists were denied a combined majority leaving the country ungovernable as a minority government tries and pass a new raft of austerity measures.
The latest crisis could cause the collapse of a €105 billion (£90 billion) EU-IMF bail-out deal, meaning that Greece would have to leave the euro. Neo-Nazi Golden Dawn MPs will now enter the Greek parliament for the first time since the end of the military dictatorship in 1974.
The combination of both results was expected to upset markets and increase pressure on the euro as investors today get their first chance to react to the prospect of uncertainty. The early signs were ominous as the Asian markets registered an immediate drop in the euro when they opened this morning.
In a bad night for Mrs Merkel, her ruling Christian Democrat party suffered a major setback in regional elections, scraping a one-point lead over resurgent Social Democrats allied to Mr Hollande.
The anti-austerity movement across Europe is a huge challenge to Germany and its economic doctrine of austerity that until last night has ruled supreme with the support all of Europe’s leaders, the EU, European Central Bank and financial markets.
After the French and Greek votes that consensus has been shattered at a time when Europe’s economies are plunging further into recession, leaving little room to manoeuvre for governments.
Mr Sarkozy became the 11th European leader to fall foul of the economic crisis since 2008 in a catastrophic result for the French Right. He was ousted from the Elysée after just one term in the worst setback for the centre-Right for over 30 years and lost crucial votes to the National Front.
The “silent majority” that Mr Sarkozy repeatedly swore would “submerge” his Socialist rival and all those who predicted he stood no chance, failed to speak up at the 11th hour.
“The French people have made their choice … François Hollande is the president of France and he must be respected,” he said in a speech to supporters.
“I wish him good luck, it’s going to be difficult.”
In a move that will heighten warfare within his party, he said: “I will become a Frenchman among Frenchmen”, adding that he would not lead the centre-Right in forthcoming parliamentary elections.
On Sunday night Mr Hollande had won 51.56 per cent of the vote compared to Mr Sarkozy’s 48.41 per cent with 90 per cent of the ballots counted.
Over 100,000 jubilant supporters gathered at Paris’s revolutionary Place de la Bastille, a pilgrimage site for the Left, chanting “François President”.
Many were too young to remember that it was here that a gigantic crowd gathered for the 1981 victory of the last Socialist president, François Mitterrand.
But even as the festivities got under way, officials close to both Mr Hollande and Mr Sarkozy were fearful of a market backlash against the Socialist’s plans to tax the wealthy and expand jobs in the state sector.
There are concerns that Mr Hollande will be unable to respect fiscal discipline targets while enacting a tax — and-spend programme that would see him create 60,000 more state education posts, partly revoke a pension reform and slap a 75 per cent tax on millionaire owners.
A senior Conservative source told The Daily Telegraph that fears France was about to reverse course would cause turmoil and uncertainty.
He said: “Clearly it’s going to focus a lot of market attention on the French public finances, which are nothing to write home about. I don’t think it is going to make life in the bond markets any easier next week.
“We haven’t chosen austerity because it’s fun. We have to do austerity, and so does France.
“He will have to be very careful about his public spending commitments and the lack of welfare reform.”
David Cameron, the Prime Minister who had given his backing to Mr Sarkozy, called Mr Hollande to congratulate him on his victory. “They both look forward to working very closely together in the future,” said a Downing Street spokesman.
The Telegraph
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