Francois Hollande
Francois Hollande Reuters

As the realization set in that the victory of Francoise Hollande in the French presidential elections was all but inevitable, concern focused on the state of the Franco-German motor of the European Union.

German Chancellor Angela Merkel, in an unusual step, had campaigned openly for Nicolas Sarkozy, who had been her ally in pushing through a stability pact that embodied the Chancellor's formula of austerity and deficit cutting.

During the campaign, Hollande had attacked this approach and had claimed that he would renegotiate the pact to make it more growth-friendly, triggering fears that Europe would be plunged into a new round of uncertainty.

Germany and France have gotten along in the past, even when their leaders came from opposite parties.

The relationship between German Chancellor Helmut Schmidt and French president Valery Giscard d'Estaing in the 1970s was very strong. Schmidt, however, was a centrist socialist, while Giscard was a centrist conservative.

A German poll found that the Germans strongly back Merkel's appraisal of the situation in France and have no intention of veering from the austerity policy that Germany, the EU's paymaster, has imposed upon the EU. This presumably creates a collision course with Hollande who stated "it is not for Germany to decide for the rest of Europe."

Germany is not the only country that is worried. British Pensions Minister Iain Duncan Smith expressed the concern of the British government based on Holland's campaign pledges:

"He's said he's going to come out, he's going to spend money, he's going to raise taxes, everything he says will suddenly change the French economy.

"If he does any of that, it will have a shockwave effect in Europe. I think it could cause major ructions with Germany right now."

Although Britain is not a member of the euro, the government is paying its share in the bailouts and has adopted the austerity formula in Britain and paid heavily for it in Thursday's local elections.

If France abandons austerity, it will put further pressure on the debt crisis and Britain will be adversely affected. Domestic political pressure to abandon the needed austerity program will increase, using the argument that if the French are doing it 'why shouldn't we follow suit'.

There are those taking a more sanguine view on this, which - so far -  includes the financial community. The expectation is that Mr. Hollande is engaging in campaign bluster and once June's legislative elections are out of the way, he will come back to fiscal reality. The German civil service is already reaching out to Hollande and Hollande has already announced that his first visit after being elected president will be to Germany. 

He has no desire to tamper with the Franco German motor. Angela Merkel, for her part, will claim that she is not against growth, but against wasteful and massive injections of government money that do not actually stimulate growth.