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In what marks a significant shift in the balance of European politics, in the final round presidential election on May 6, Socialist Party candidate Francois Hollande defeated right-wing incumbent Nicolas Sarkozy of the centre-right Union for a Popular Movement by almost 52% to 48%.

Hollande is France's first president from the social democratic Socialist Party in France in 17 years. Sarkozy is the first president since 1981 not to win a second term.

This defeat is a big blow to the consensus position on austerity in Europe — often known by the label “Merkozy”, indicating its two most prominent backers, Sarkozy and German Chancellor Angela Merkel.

A further consolidation of this consensus position through a win for Sarkozy, combined with his pitch to the far right, would have been a disaster for the working class in France and across Europe.

Hollande was set to officially take the reigns on May 15, and was in the process of drawing up a cabinet of ministers.

After the initial euphoria of the election result, the growing political crisis in Greece and the rise of the charismatic leader of the far-left SYRIZA, Alexis Tsipras, have begun to overshadow the developments in France.

However, it is precisely this context of an increasingly polarised and tumultuous Europe, and a growing popular resistance to austerity, that makes Hollande’s victory and his first moves as president particularly significant.

Hollande’s policies — including calls for raising taxes for the rich (a 75% tax on people earning over 1 million euros), job creation, and for returning the retirement age from 62 to 60 — as well as his anti-austerity rhetoric won him support.

“Austerity need not be Europe’s fate,” Hollande told the people of France during his election speech.

Hollande comes to power just as the Bank of France reports zero growth in the first months of this year and predicts continued stagnation until at least the middle of the year.

Despite his claim that he represents “change” in France, Hollande’s policies are for minor changes rather than a drastically new course for French politics or their relationship with the EU.

Even the minor changes will come under pressure from powerful interests. This raises questions over whether Hollande will deliver even the mild reforms promised. But it also means that any reforms won will have been achieved despite opposition.

Primarily, Hollande calls for renegotiating the latest hard-line austerity fiscal pact agreed on by 25 EU countries in March.

The debate will centre on whether to reintroduce some measures of economic growth stimulus in what will otherwise remain the same package.

Merkel welcomed Hollande “with open arms”. However, she immediately declared that the fiscal pact was “not up for grabs” and that there will be no negotiation on movements away from austerity in favour of government support for growth and job creation.

Voices in France and Germany are emerging expressing confidence a compromise will be struck. Hollande, as much as Merkel, is unlikely to want to destabilise the eurozone further by creating big rifts between its two central pillars.

That said, the scale of the crisis is so deep, and the anger among ordinary people in France and elsewhere is so great, it is impossible to predict with confidence what the outcome of a Hollande presidency, and Europe-wide negotiations, will be.

Merkel has also challenged Hollande to renege on his campaign promise of a withdrawal from Afghanistan by the end of this year, and instead to stick to the accepted time of late 2014.

Hollande’s bargaining power with Merkel is contingent upon Socialist Party gaining a majority in parliament during the legislative elections in June. The likelihood of a defeat for the Socialist Party is low, but not out of the question.

Real developments in the relationship between France and Germany will therefore probably not take shape until the European council in late June.

In any case, Hollande has to walk a tightrope between the expectations of his social base and the needs of the ruling elite — as social democrats tend to have to do in times of crisis.

The rise of the more radical anti-austerity Left Front, whose presidential candidate Jean-Luc Melenchon won 11%, as a real competitor for the left-wing vote also puts pressure on Hollande.

To contain this pressure, he will have to prove that his government is different to the discredited former social democratic governments in Spain and Greece in particular, which bent over backwards to submit to the demands of Europe's ruling classes.

The role of the Left Front, now a big player in French parliamentary politics, will be important in this new phase.

In his response to the electoral result, Melenchon said: “Nicolas Sarkozy has been beaten by the Left Front.”

Despite criticisms from �鶹��ý of the left over his alleged willingness to fall into line behind Hollande, Melenchon’s criticisms of the Socialist Party have so far remained firm.

He said: “This is the first time [in French history] that the socialists come to power without any project for society or any emblematic reform.”

Melenchon also said he would not take part in any government that he didn’t lead. Rather, he said the Left Front's primary goal was to “deepen our victory” at the legislative elections in June.

As opposed to the presidential elections, where many would-be Left Front voters turned to the Socialist Party to avoid a win for Sarkozy, many voters may be willing to back the Left Front.

In a continuation of Left Front's combative stance against the far right, there is also the chance that Melenchon will run in the same electorate as National Front leader Marine Le Pen. That would further draw attention to France’s left-right polarisation.