François Hollande’s victory in Sunday’s French presidential election will change the dynamic in Europe, away from an exclusive focus on austerity, towards a commitment to create jobs and growth.

Shortly after the results were declared on Sunday evening, France’s first socialist president since 1995, addressed a jubilant crowd patiently waiting in the rain in his regional power base of Corrèze.

Hollande did not pronounce a new dawn. His speech was remarkably sombre. He reminded people of the many serious challenges that France and Europe faces. Later, at the Place de la Bastille in Paris, he emerged on stage to deafening cheers from the massive crowd that had gathered. I have never seen a political celebration quite like it. Doing a Radio 5 live interview with John Pienaar in one of the square bustling bars was also pretty surreal.

Many young people there had been told by their parents of the 1981 celebration of François Mitterand’s victory and it felt like history repeating itself. They are a generation of Français who have only ever known rightwing presidents.

Hollande knows that expectations are dangerously high and is also acutely aware of scale of the challenge ahead. One of Hollande’s senior team members, Michel Sapin, a former finance minister, has been at pains to stress that the new president plans to eliminate the deficit by 2017. He expressed his exasperation yesterday when he said ‘nobody expects us to arrive in power and hand out money’.

For too long Hollande has been underestimated by his opponents. Many warned that the markets would punish France if they elected a socialist. Others predicted there would be a run on the banks. Embarrassingly for David Cameron, his work and pensions secretary, Iain Duncan Smith, couldn’t resist jumping on the bandwagon, suggesting a socialist victory would have a ‘shockwave effect on Europe’. For the time being, this rightwing conspiracy remains just that – a conspiracy. The rating agencies yesterday confirmed that the change in government would not affect France’s credit rating and the drop in the euro is primarily a response to the Greek elections.

So what does Hollande’s victory mean for Europe?

As Ed Miliband said on Sunday night Hollande’s ‘new leadership is sorely needed as Europe seeks to escape from austerity’. German Chancellor Angela Merkel has been quick to insist that the Fiscal Pact has already been agreed by 25 member states and will not be renegotiated. However, there is now a growing chorus of voices calling for change.

Among them are Italian prime minister, Mario Monti, who has been arguing for months that austerity alone is choking off Europe’s recovery and the European Central Bank’s governor, Mario Draghi, who last week called for a growth compact.

From Hollande’s campaign team, Elizabeth Guigou, a former Europe minister, is likely to be reappointed to the post in the new government, and has been quietly touring European capitals to discuss the substance of Europe’s growth agenda.

There seems to be broad agreement about a greater role for the European Investment Bank in generating new investment in infrastructure, through the issuing of so-called project bonds. More controversial is the move towards creating eurobonds. Merkel is implacably opposed to the proposal but the German Social Democrats are in favour and the balance of power could well shift in their direction after the federal elections in autumn next year.

The day after Hollande’s inauguration next week, he will travel to Berlin to meet the German chancellor. Although, their starting points might be different, their style and personalities are much more suited than Merkel and Sarkozy’s. Hollande is a pragmatic social democrat, who is open to debate and building consensus. Their French socialist and German Christian Democrat forebears, Mitterand and Kohl, showed that, despite ideological differences, the relationship can be successful.

The prime minister now needs to rebuild bridges with Hollande. Cameron badly miscalculated the French election result. It seems that he believed that Sarkozy would pull through in the end and, in another act of diplomatic cack-handness, snubbed Hollande on two occasions earlier this year.

Up until now, the Tory-led government here has argued that their deficit reduction plan is in line with the eurozone’s focus on austerity. A change of direction in Europe will therefore only increase the prime minister’s marginalisation. An alternative in the US has been effective. President Obama introduced a fiscal stimulus as well as reduce the deficit. The American economy is now growing and unemployment is falling.

An alternative is emerging in Europe.

Even after bruising local election results Cameron insists that the government should stick to its plans on the economy. Hollande’s victory offers an opportunity for Europe to consider a path back to growth. Both the Tory-led government in the UK and other European governments should take this chance.

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Emma Reynolds is shadow minister for Europe and MP for Wolverhampton North-East

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Photo: Francois Hollande