New Europe?

French President-elect Hollande casts doubt on austerity

The election of François Hollande as president of France sent shock waves through markets in Asia and Europe on Monday and prompted German Chancellor Angela Merkel to lay down red lines about Europe's future.

In his victory speech Sunday night, Hollande signaled a possible end to the sharp budget cuts that have become a European article of faith in response to economic and budget crises across the continent.

"Austerity can no longer be something that is inevitable," Hollande said after defeating President Nicolas Sarkozy.

Sarkozy must hand over power by midnight May 17.

Merkel said Monday that she was in favor of economic growth but that it could not be based on government debt.

"The core of the discussion is about whether we are going to have programs for growth that are on the back of debt or programs for growth that are going to be sustainable," she said.

Her spokesman, Steffen Seibert, said earlier Monday that it was "not possible" to renegotiate the European Union fiscal pact. The deal, championed by Merkel and Sarkozy, demands that EU governments stay within strict debt limits.

Merkel invited Hollande to Berlin "as soon as possible after he is sworn in" and said she would welcome him with "open arms," Seibert said.

"Both agree on how important tight German-French relations are and have assured one another that they'll strive to work together well and with trust," Seibert said on the chancellor's website.

Markets in Europe and Asia plunged in the wake of Hollande's election, predicting that one of the nations that drives European policy will shift to the left.

Tokyo's Nikkei and the Hang Seng index in Hong Kong both dropped more than 2%, while markets in Germany and France dropped more than 1% in Monday morning trading.

Hollande officially won 51.62% of the vote Sunday, while Sarkozy took 48.38%. The vote was a runoff between the two top finishers of the first round of elections in April.

A little more than 80% of registered voters cast ballots Sunday, including 4.66% who handed in blank ballot papers, the Interior Ministry said.

Speaking to supporters Sunday in the city of Tulle, Hollande alluded to becoming the first Socialist president since François Mitterand left office in 1995.

"Many people have been waiting for this moment for many long years. Others, younger, have never known such a time. ... I am proud to be capable to bring about hope again," he told the cheering crowd.

Later, Hollande went to Paris, where he addressed a large crowd at the Bastille. Supporters waved flags and shouted his name.

"I know what many people feel -- years and years of wounds, of ruptures, and we have to repair, recover, unite. That is what we're going to do together," he vowed.

Crowds roared at the center-left candidate's campaign headquarters as the exit poll results came out Sunday evening. Celebratory car horns blared along the Champs-Élysées in Paris.

"It's a great night, full of joy for so many young people all across the country," said Thierry Marchal-Beck, president of the Movement of Young Socialists.

U.S. President Barack Obama called Hollande shortly after results were in to congratulate him and invite him to the White House.

Sarkozy had fought to keep his job amid a wave of discontent over his inability to rein in unemployment. He defended his economic record despite low growth and unemployment at about 10%, saying the impact of Europe's debt crisis could have been far worse.

France is a key player in plans to lead the eurozone out of its debt crisis.

Sarkozy's defeat marks the latest -- and most significant -- of more than half a dozen European leaders swept from office during the eurozone economic crisis, including the Greek and Italian prime ministers.

France's vote came the same day as the Greek parliamentary election. Exit polls in that country indicated Greece's ruling coalition appeared headed for steep losses, while parties on the far left and far right were poised to make significant gains amid anger over austerity measures.

Sarkozy has been president since 2007. He becomes the first sitting French president in three decades not to be re-elected.