France's president-elect Francois Hollande set about the task of building his government and ties with allies on Monday as world markets eyed political developments in the eurozone with concern.

Supporters of Francois Hollande celebrate at Place de la Bastille in Paris on May 6, 2012 after the announcement of the first official results of the French presidential final round. , Photo: AFP

The 57-year-old Socialist won power Sunday in a close race against France's outgoing right-wing leader Nicolas Sarkozy, triggering joyful street parties, and now faces the immediate challenge of dealing with Europe's debt crisis.

A date for the formal handover of power has not yet been set -- it should come before May 15 -- but Hollande has begun consultations with European allies, including telephone talks with Germany's Chancellor Angela Merkel.

Asian markets and the euro slumped on Monday amid concerns that victories for Hollande in France and for opposition parties in Greece marked a backlash against austerity measures designed to contain the eurozone crisis.

Hollande, while no radical, has vowed to slow the pace of Sarkozy's public spending cuts and renegotiate the EU fiscal pact, under which the 17 members of the single currency bloc agreed tough measures to slash their deficits.

Debt-wracked Greece is facing political and economic turmoil after parties opposed to its EU and IMF-led austerity programme stripped the coalition government of its majority and an extreme right-wing group won its first seats in 40 years.

The uncertainty depressed Asian markets: Tokyo dived 2.75 percent, Hong Kong slumped 2.43 percent, Sydney fell 1.84 percent, Seoul shed 1.81 percent, Wellington was 0.38 percent lower and Shanghai lost 0.26 percent.

In France, Hollande's economic plan replaces some of Sarkozy's cost-cutting with higher taxes on the wealthy but still foresees a balanced budget by 2017, despite a hiring spree in education and a return to retirement at 60.

Bond markets have had six months to get used to the idea of a return to Socialist rule, and panic is not expected, but if concerns over Paris lead to higher borrowing costs then the deficit target will be harder to meet.

In his victory speech on Sunday, Hollande admitted that the eyes of Europe and the world were on France, but promised to carry through on his promise to revise the hard-won EU stability pact to focus more on growth than cuts.

"You are much more than a people who want change. You are already a movement that is rising across all of Europe and maybe the world," he told the cheering masses celebrating his victory in Paris' iconic Bastille Square.

"This is the mission that is now mine: to give the European project a dimension of growth, employment, prosperity -- in short, a future," he had said earlier, at another speech in his electoral stronghold of Tulle.

"This is what I will say as soon as possible to our European partners and first of all to Germany," he said. "We are not just any country on the planet, just any nation in the world, we are France."

Merkel invited Hollande to Berlin for talks, and her Foreign Minister Guido Westerwelle told reporters in Berlin: "We will work together on a growth pact. I am confident the Franco-German friendship will be further deepened."

After seeing Merkel shortly after his inauguration Hollande will face a series of international meetings, including a G8 summit in the United States on May 18 and 19 and a NATO gathering in Chicago on May 20 and 21.

US President Barack Obama invited Hollande for talks at the White House before the G8 summit.

The United States is in particular concerned about his pledge to pull France's 3,300-strong

contingent out of the NATO-led force in Afghanistan by the end of this year -- a year earlier than previously planned.

Hollande will have to complete the task of casting his new government in the coming days, before his party sets off on the campaign trail for France's June parliamentary election, when he will hope to secure a ruling majority.

Sarkozy, still only 57 (like his rival), congratulated Hollande on the win and signalled that he intends to step back from frontline politics.

Source: AFP