Can Hollande save Europe?

France handed the presidency to Leftist Francois Hollande, a champion of government stimulus programmes who says the state should protect the downtrodden - a victory that could deal a death blow to the drive for austerity that has been the hallmark of Europe in recent years.

Mild and affable, the President-elect inherits a country deep in debt and divided over how to integrate immigrants while preserving its national identity. Markets will closely watch his initial moves as President.

Hollande portrayed himself as a vehicle for change across Europe.

'In all the capitals... there are people who, thanks to us, are hoping, are looking to us, and want to finish with austerity,' he told exuberant crowds of supporters in a speech early this morning at Paris' Place de la Bastille. 'You are a movement lifting up everywhere in Europe, and perhaps the world.'

The party reached into the night on the iconic plaza of the French Revolution, with revelers waving all kinds of flags and climbing the base of its central column. Leftists are overjoyed to have one of their own in power for the first time since Socialist Francois Mitterrand was president from 1981 to 1995.

Hollande narrowly defeated the hard-driving, attention-getting Nicolas Sarkozy, an America-friendly leader who led France through its worst economic troubles since World War II but whose policies and personality proved too bitter for many voters to swallow.

He will take office no later than 16 May.

Sarkozy is the latest victim of a wave of voter anger over spending cuts in Europe that has ousted governments and leaders in the past couple of years.

After slamming Europe's austerity fix for the debt crisis, Francois Hollande's crusade for growth began picking up support even before his win, but can he bring the sceptics and the markets around?

One of only a handful of Socialist leaders at the European Union [EU] table, Hollande's win adds another voice for the Left after the ousters of Britain's Gordon Brown, Portugal's Jose Socrates and Spain's Jose Luis Zapatero.

In his first words the freshly-elected French President said his victory marked 'a new departure for Europe and hope for the world' because it showed 'austerity can no longer be the only option'.

But as unemployment hits its highest level ever in Europe since the creation of the euro, Hollande's calls to rewrite a just-inked and long-negotiated EU fiscal pact to enforce budgetary discipline has upset markets and ruffled German Chancellor Angela Merkel.

'There is real potential for friction,' said analyst Maurice Fraser of London's Chatham House think-tank.

'Can they change the wording, will he be happy with a vague shift?' he said of a pact agreed by 25 of the EU-27 on terms largely penned by Merkel and her French ally, outgoing incumbent Nicolas Sarkozy.

'These issues will take a long time to negotiate with Germany,' Fraser added. 'And the Franco-German motor will need to demonstrate the show is not coming apart. They might have been high-handed but at least they looked like credible European leaders.'

Seeking to soothe fears of a breakdown in the Paris-Berlin partnership that drove Europe through the crisis, German Foreign Minister Guido Westerwelle said after Hollande's victory: 'We will work together on a growth pact.'

'I have no doubt that we will rise to our common challenges,' he added.

As austerity fatigue sets in across the continent, driving far-right gains in France and Greece, Hollande's call for a switch of focus has found wide support - from French voters, from the European Commission and to an extent from the man in charge of eurozone monetary policy, European Central Bank chief Mario Draghi.

But Hollande faces parliamentary elections as soon as mid-June, days before an EU summit, and will need to show his electorate he can deliver.

Meanwhile Spain has cashflow trouble, Italy is fighting to stay afloat and an under-performing France - already facing lengthening jobless queues and growing disparity with Germany -- has been threatened with a ratings downgrade in the wake of a Hollande victory.

So much speculation touches on whether the new leader of the world's fifth economy - Europe's second - will hugely disrupt EU and eurozone politics with his calls for a swing to growth.

'Europe should have no real reason to fear his victory,' said analyst Thomas Klau of the European Council on Foreign Relations, after The Economist labelled him 'the rather dangerous Monsieur Hollande.'

The new French leader, a pro-European said to have arch European federalist Jacques Delors as his mentor, 'is a natural compromise-builder,' Klau said.

'Hollande is far more predictable than Sarkozy, who was a man of his own, a little bit all over the place,' said a senior EU diplomat.

Hollande has four initial demands of the EU: he wants more money in the European Investment Bank, a new financial transactions tax, new EU bonds to fund large job-creating infrastructure projects and the use of unspent EU funds to spur growth.

All four are already in the EU executive pipeline, though facing varying degrees of opposition from various quarters, notably Britain and Germany.

Hollande 'might change the face of the EU,' said Hugo Brady of the Centre for European Reform in Brussels.

'Because a lot more is needed than the fiscal compact to save the single currency, it will be easier for Hollande to present himself as the spokesman for the disenchanted of the crisis,' he said.

But despite his pro-European credentials, others see Hollande fighting in the main to keep national interests to the fore.

'It's an exaggeration that we'll see a more pro-European France, that under a Socialist, France would be more community-oriented,' said Fraser.

'France will continue to act robustly in its own interests, though the language might change.'