Germany warns France there is no easy way out after it elects anti-austerity president - as sour-faced Sarko breaks cover for last official duties

Markets stabilise as trading closes for day - but Greece is still 6.6% down



French president elect Francois Hollande pledges to push anti-austerity



But Germany says there is no choice but to stick to the current fiscal plan

Exodus of 'le super-rich' to London expected in light of planned 75% tax rate



Greece teetering on collapse as voters fail to elect a new government



Greek neo-Nazis triumphant after polling around 7% of the vote



Analysts warns results could tip single currency into collapse within months



France's president elect Francois Hollande today began the task of building his new government as he was thrust right into the heart of the Eurozone crisis.

Just hours after his historic victory over Nicolas Sarkozy, the French Socialist's pledge to scrap the austerity agenda was already under attack from Germany.

And there was turmoil in Greece after voters failed to elect a majority government. Instead, the country faces weeks of protracted talks and uncertainty.



The result sent markets tumbling across Europe this morning though most exchanges had recovered by the end of the day. Greece remained 6.6 per cent down.

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Victory: President-elect Francois Hollande waves from the balcony of the Socialist Party headquarters in Paris today after defeating Mr Sarkozy

French kiss: The new 'first lady' Valerie Trierweiler and President-elect Francois Hollande in an onstage show of affection during the victory rally in Paris last night

All change: Sarkozy and his wife Carla Bruni (left) leave the Elysee Palace after his election defeat while Francois Hollande and partner Valerie Trierweiler set out to greet the public in Tulle, France Arriving at his campaign headquarters in Paris on Monday morning, where he was due to hold discussions on forming a new government, Hollande emphasized that for the next few days at least conservative Nicolas Sarkozy remained in office. 'I must prepare myself. I said that I was ready and now I must make sure I am, completely,' he told reporters. With anti-austerity parties winning more than half the votes in Greece, the euro tumbled to a three-month low against the dollar; oil and European shares slumped to 4-1/2 month lows. 'If (Hollande) really refuses the budget-balancing rule, if he refuses to balance the books in 2016, there will be pressure from investors who currently trust us,' outgoing conservative Finance Minister Francois Baroin said. Hollande has said he would balance the budget by the end of his five-year term. Holding her course: German Chancellor Angela Merkel Hollande is expected to include some trusted old hands in his government like Mitterrand's prime minister Laurent Fabius but add many younger faces, notably women. His economic team, led by centre-left former finance minister Michel Sapin, includes politicians, industry leaders and public officials seen as market-friendly. 'The words 'grace period' do not apply to the situation. That's the reality,' Sapin said, adding that the priority would be to launch discussions with France's European partners. 'Nobody expects that we simply arrive in power and hand out money. That doesn't correspond to the reality of the situation.' Economists say Hollande must quickly outline his domestic plans, likely to centre on a major tax reform, and revise over-optimistic growth targets which threaten deficit-cutting goals. His plans to tweak a reform that raised the retirement age to 62 and increase the minimum wage are unsettling investors who fear France could drift away from the club of trusted northern European borrowers and towards the debt-laden periphery. Standard & Poor's, which stripped France of its triple-A rating in January, said Hollande's victory had no immediate impact on its creditworthiness, though it would scrutinize his policy choices. There was at least a one in three chance of a cut to France's long-term rating within two years, it said.

The Euro plunged to a three-month low as Mr Hollande planned a series of talks with the European Central Bank and Chancellor Merkel in which he is expected to make his demands. Hollande already has a packed diary that includes an invite to the White House, visits to the G-8 and Nato summits and a World War II ceremony with his defeated rival.

Around Europe, markets remain deeply uncertain about Mr Hollande's agenda - and how hard he will push to dilute the German-led European austerity drive. In Greece, stocks plunged 8 per cent in early trading after the two main parties suffered heavy losses at the ballot box. In Europe, shares opened sharply lower but recovered some ground as the day wore on. Germany's DAX was down 0.8 percent at 6,506, while the CAC-40 in France fell 0.3 percent at 3,153.

In the currency markets, the euro plunged to a three-month low against the dollar at $1.2972.

Triumph: A huge crowd of celebrates the victory outside France's Socialist Party's headquarters in Paris Festival atmosphere: Socialist supporters pile into Place de la Bastille, Paris, to celebrate Mr Hollande's win Party time: Hollande Supporters listen to the new President-Elect speak at Place de la Bastille last night However, it has since recovered ground and is up 0.5 percent at $1.3032. The markets are closed in Britain as it is a bank holiday but they could resume on the back foot after slumping two per cent on Friday on fears the US recovery is running out of steam. One of the most worrying aspects of the Greek vote was the success of the far-right party Golden Dawn which had nabbed a 6.9 percent share, with 63 per cent of the votes counted. This could mean it having 21 deputies, making it the first time a far right party would be in parliament since the fall of a military dictatorship in 1974. The party denies it is neo-Nazi but has pledged to 'clean up' Greece by expelling all legal and illegal immigrants. Man of the moment: A grinning Francois Hollande greets supporters as he arrives to give his acceptance speech in his political heartland of Tulle, southwestern France Jubilation: Key members of Mr Hollande's campaign team celebrate the result alongside crowds of supporters inside the Socialist Party's headquarters The winning side: From left, National Secretary for communication David Assouline, party spokesman Benoit Hamon, campaign policy advisor Aurelie Filippetti and political advisor Harlem Desir amid an ecstatic crowd at the Socialist Party HQ 'I take responsibility': France's incumbent president looks sheepish as he appears on stage before UMP supporters in Paris

Its leader Nikolaos Mihaloliakos, who famously gave the Nazi salute after being elected to Athens City Councvil in 2010, said: 'We will continue our struggle for a free Greece, free from foreign loan sharks and a Greece that is independent and proud, without the slavery of the bailout.'



The party's flag features an ancient Greek symbol resembling the Nazi swastika set against a red background.

BLOW FOR CHANCELLOR MERKEL AT GERMAN ELECTIONS

Voters in Germany's northernmost state have ousted their center-right government made up of the same parties as Chancellor Angela Merkel's federal coalition. The defeat of Merkel's allies in Schleswig-Holstein state is being seen as an omen of worse to come.

Elections are due in North-Rhine Westphalia state - the country's most populous with 18 million inhabitants - where according to recent polls her party also risks losing power. Sunday's vote in Schleswig-Holstein produced no clear winner, but the center-left opposition parties appear poised to form a coalition with a party representing the state's Danish minority. The upstart Pirates party, which demands near-total transparency and an unrestricted Internet, roughly quadrupled its share of the vote to above 8 per cent, securing seats in the legislature for the first time. The conservative Christian Democrats lost less than 1 percent to 30.9 percent, but it still resulted in the worst score for Merkel's party in the state in five decades.

Their coalition partner, the pro-business Free Democrats, slid from 14.9 percent to 8.2 percent, according to official results published by the state's election commission early Monday local time. The opposition Social Democrats gained about 5 per cent and secured 30.4 percent of the vote while the Greens stood at about 13 percent, followed by the Pirates with 8.2 percent. The communist Left Party failed to secure enough votes to pass the minimum threshold to re-enter parliament, but the SSW party representing the state's Danish minority secured 4.6 percent and will again have seats in the legislature. While the opposition failed to secure an outright majority, the Social Democrats could form a coalition government with the Greens and the party of the Danish minority - an option which all parties involved have welcomed.

Mrs Merkel, who was battered in a local election result in Germany on Sunday night, needs to prevent the new president from straying too far from the fiscal pact she hammered out with Sarkozy.



But the euro dropped within minutes of the election result with his pledges of spending, spending and spending some more to re-invigorate the 5th largest economy in the world sending jitters around global markets.

'The chancellor invited the French president-elect Hollande to come to Berlin as soon as possible after his inauguration,' Merkel's spokesman Steffen Seibert said in a short statement following the phone call between the pair.

'Both agreed how important close Franco-German relations were and assured each other that they would strive for good and trusting cooperation,'Seibert added.



Mr Holland expected to demand a new ‘preamble’ written into the European fiscal pact signed by 25 EU nations last year to water down calls for austerity measures.

He wants a change to strict rules which dictate how much member states can spend, without which most observers believe a new European economic crisis is inevitable.

He has pledged to slap a 75 per cent tax on those earning more than one million euros a year, or around £850,000.

The move is expected to lead to an exodus of 'le super rich' - with many of them likely to head to London where the top rate of tax will be 45p.

Mr Sarkozy and Germany's Angela Merkel spearheaded the cost-cutting treaty, and many have worried about potential conflict within the Franco-German 'couple' that underpins Europe's post-war unity.

Today Standard & Poor's said that the Mr Hollande's election would not have an immediate impact on France's AA+ credit rating.

However, they said there is 'at least a one in three chance' that it will be lowered before the end of 2013.

City analysts said that while stock markets had expected a Hollande win, the results in Paris and Athens could tip the strained eurozone back into turmoil.

Goldman Sachs economist Natacha Valla, speaking on BBC Radio 4's Today show, said: 'Public accounting and austerity have been big words in this campaign and are likely to be big words again in the general election.'

She went on to say that Hollande may have to curb some of his pledges to fit in with European austerity measures the country and Germany have already signed up to.



'Need to be sure everyone understands the same thing when speaking about growth which I'm not sure is the case at the moment.

'When you compare the programmes of both candidates they were pretty similar.

'It's not clear how Hollande will finance all these measures he has put on the table.

'This will have to be confirmed when the new government is sworn in.

'I'm sure he is going to be willing to start to launch some reforms straight away.

'The more worrying items will have to do with finance and short-term spending.'

Mr Hollande claimed that many voters in Europe would greet his election with relief.



‘Europe is watching us, austerity can no longer be the only option,’ he said.

Struggling to contain his emotions, Mr Sarkozy said: ‘I did my best to protect the French people during the events of the past five years, so that France could come out stronger from this crisis.’



He finished: ‘You are the eternal France, I love you.’

sARKOZY is the 11th European leader to be swept from office since the start of the economic crisis in 2008

Success: Greece's Golden Dawn party, led by Nikolaos Mihaloliakos, is set to become the first far-right party in Parliament for 40 years Far right: Leader of the Greek Golden Dawn party Nikolaos Mihaloliakos is backed a by two burly supporters and his party's swastika-style flag as he speaks to reporters following strong election gains Neo-Nazis: Dressed in black shirts, Golden Dawn supporters brandish flares in the Greek port city of Thessaloniki On a day of high drama: Mr Hollande defeated Mr Sarkozy by 52 per cent to 48 in only the second time a sitting French President has failed to win a second term;

Greece’s conservative New Democracy and socialist PASOK parties risked falling short of the 151-seat majority needed to form a coalition government;

Financial experts warned that the Euro could collapse within months;

British officials admitted that David Cameron made a serious error by ostentatiously backing Mr Sarkozy’s re-election bid. The uncharismatic Mr Hollande, who has never held any ministerial office and is the first socialist to win the French presidency since Francois Mitterrand in 1988, has been an outspoken advocate of rewriting the plans to save the single currency. He wants a new ‘preamble’ written into the new European fiscal pact signed by 25 EU nations to water down calls for austerity measures. He is demanding a change to strict rules which dictate how much member states can spend, without which most observers believe a new European economic crisis is inevitable. After his victory he said that one of his priorities was to ‘preserve our social model’ – a reference to France’s generous welfare state.

And the losers: A distraught supporter of Sarkozy's UMP party reacts to the early results at the Mutualite meeting hall in Paris Crestfallen: Two young Sarkozy supporters look on as the first results from the second-round elections arrive in Paris Bitter defeat: A UMP supporter sobs while another covers his face with the French flag as the results are announced at the party headquarters in Paris



The new president has pledged to spend an extra 20billion euros in the years ahead to kickstart the economy and wants to slap a 75 per cent tax rate on those earning more than one million euros a year, or around £850,000.

He says he ‘dislikes the rich’ and has singled out ‘the world of finance’ as his principal enemy. Douglas McWilliams, of the Centre for Economics and Business Research, said that this ‘could be the week that starts the euro break-up’.

He predicted that the ECB might have to lend more money to banks if there is a stock market ‘wobble’ in response to Hollande’s triumph.

‘Each bout of printing money brings the end of the euro nearer,’ he said.

City veteran David Buik, of trading firm BGC Partners, said that France’s affairs paled beside the impact of the Greek election and persistent fears that Spain will be the next European domino to fall.

Concern: Stock traders watch their screens in Paris. Across Europe markets have tumbled as uncertainty grows over Hollande's socialist agenda

Putting a brave face on it: Sarkozy arrives to address his supporters after the result reaches crowds at La Mutualite hall in Paris Bottoms up: A young Socialist supporter celebrates the party's win with a drink on the streets of Paris Socialists on top: Elated Hollande supporters climb on a bus stop in Paris

‘Greece is close to collapse and Spain is deep in a financial quagmire,’ said Mr Buik. ‘I will be very surprised if the Eurozone is not split in 18 months time.’

Last night David Cameron, who snubbed Mr Hollande during a recent visit to the UK, phoned the new president to congratulate him.

A Downing Street spokesman said: ‘They both look forward to working very closely together in the future and building on the very close relationship that already exists between the UK and France.’

Labour leader Ed Miliband, who met Mr Hollande during his London visit, also sent his congratulations.

‘This new leadership is sorely needed as Europe seeks to escape from austerity, and it matters to Britain,’ he said.