Financial markets are braced for a radical shift in economic policy and fresh question marks over a eurozone break-up, as Francois Hollande moves into the Elysee Palace on Monday as the first Socialist president of France for 30 years.
A confrontation between the new president and Angela Merkel, Germany's chancellor, is also high on the markets' worry list.
However leading economists believe Mr Hollande will attempt a damage limitation exercise to avoid increasing turmoil in a eurozone facing further upheavals, with the result of this weekend's Greek election increasing speculation about an eventual break-up of the fragile currency bloc.
Mr Hollande's 'farewell to austerity' programme, which combines taxing the rich, raising public spending and lowering the retirement age, has raised the expectations of the French electorate about the end of the 'Merkozy' era.
But Ms Merkel is unlikely to cede ground in the face of Mr Hollande's demand for a re-writing of the eurozone fiscal pact.
Christian Jimenez, a fund manager at Diamant Bleu Gestion in Paris, said: "Hollande's victory has already been priced in by markets, however his promises made during the campaign have not been priced in, so there is risk on the downside if he stands his ground when he announces a first set of measures.
"There's a clear need to boost economic growth across Europe, no question, but the debate is on how to achieve that without spooking investors.
All in all, Hollande won't be able to convince Merkel to soften her position on the need for austerity."Chancellor George Osborne appeared diplomatically relaxed at Mr Hollande's victory.
"I don't think it's a problem. He's not anti-austerity. He's made it very clear he wants to deal with the deficit. But he is a centre-left politician who has not stood against austerity. He wants measures to free up the French economy."
Mr Hollande takes over with manufacturing in the eurozone showing little sign of pulling out of a nine month fall in output and unemployment at almost 11pc – the highest since the common currency debut 13 years ago. Top EU officials have been preparing for the arrival of a new French leader with something of a u-turn.
Oli Rehn, EU Commissioner for economic affairs, talked enthusiastically at the week-end about bridging the gap between German austerity and French growth to provide a new policy emphasis.
He called for a "restoring growth in Europe" programme and said that while fiscal consolidation was unavoidable the key to growth in the medium term lay with active public policies to promote sustainable growth. "The stability and growth pact is not stupid," he maintained.
telegraph.co.uk
A confrontation between the new president and Angela Merkel, Germany's chancellor, is also high on the markets' worry list.
However leading economists believe Mr Hollande will attempt a damage limitation exercise to avoid increasing turmoil in a eurozone facing further upheavals, with the result of this weekend's Greek election increasing speculation about an eventual break-up of the fragile currency bloc.
Mr Hollande's 'farewell to austerity' programme, which combines taxing the rich, raising public spending and lowering the retirement age, has raised the expectations of the French electorate about the end of the 'Merkozy' era.
But Ms Merkel is unlikely to cede ground in the face of Mr Hollande's demand for a re-writing of the eurozone fiscal pact.
Christian Jimenez, a fund manager at Diamant Bleu Gestion in Paris, said: "Hollande's victory has already been priced in by markets, however his promises made during the campaign have not been priced in, so there is risk on the downside if he stands his ground when he announces a first set of measures.
"There's a clear need to boost economic growth across Europe, no question, but the debate is on how to achieve that without spooking investors.
All in all, Hollande won't be able to convince Merkel to soften her position on the need for austerity."Chancellor George Osborne appeared diplomatically relaxed at Mr Hollande's victory.
"I don't think it's a problem. He's not anti-austerity. He's made it very clear he wants to deal with the deficit. But he is a centre-left politician who has not stood against austerity. He wants measures to free up the French economy."
Mr Hollande takes over with manufacturing in the eurozone showing little sign of pulling out of a nine month fall in output and unemployment at almost 11pc – the highest since the common currency debut 13 years ago. Top EU officials have been preparing for the arrival of a new French leader with something of a u-turn.
Oli Rehn, EU Commissioner for economic affairs, talked enthusiastically at the week-end about bridging the gap between German austerity and French growth to provide a new policy emphasis.
He called for a "restoring growth in Europe" programme and said that while fiscal consolidation was unavoidable the key to growth in the medium term lay with active public policies to promote sustainable growth. "The stability and growth pact is not stupid," he maintained.
telegraph.co.uk
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