PHOTOS: Socialist Hollande is new French president

Socialist party leader Francois Hollande defeated conservative incumbent Nicolas Sarkozy to be elected as France's first left-wing president in 17 years.

Hollande, a 57-year-old centre-left moderate, won the vote with between 52 and 53 per cent, according to several estimates

"Europe is watching us. I'm sure that in many European countries there is relief and hope at the idea that austerity does not have to be our only fate," the president-elect said in a victory speech in his constituency of Tulle in central France.

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Jubilant Hollande supporters celebrated outside Socialist Party headquarters and thronged Paris' Bastille square, where revellers danced the night away in 1981 when Francois Mitterrand became the only previous directly elected Socialist president.

Many waved red flags and some carried roses, the party emblem.

Hollande, who has vowed to begin his reforms as soon as he takes office on 15 May, has accepted he will have "no state of grace" leading a country crippled by public debt and in economic crisis, with unemployment nudging a record 10%, a gaping trade deficit, stuttering growth and declining industry.

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The election was marked by fears over European Union-imposed austerity and economic globalisation, and Hollande has said his first foreign meeting will be with German Chancellor Angela Merkel - the key driver of EU budget policy.

Hollande has promised more government spending and higher taxes - including a 75-per cent income tax on the rich - and wants to renegotiate a European treaty on trimming budgets to avoid more debt crises of the kind facing Greece.

That would complicate relations with Merkel, who championed the treaty alongside Sarkozy. Under Sarkozy, France pledged to rein in its spending while the rest of 17 countries that use the euro embark on a strict period of belt-tightening.

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The outgoing president conceded defeat within 20 minutes of polls closing, telling supporters he had telephoned Hollande to wish him good luck in such trying times.

"From the bottom of my heart I want France to succeed with the challenges it faces. It is something much greater than us, France. This evening we must think exclusively of France. I bear the full responsibility for this defeat. My place can no longer be the same. My involvement in the life of my country will be different from now on," Sarkozy said, indicating that he would withdraw from frontline politics.

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US President Barack Obama later called up Hollande to congratulate him on his electoral victory and indicated him that he looks forward to working with him on a range of issues, the White House said.

"President Obama indicated that he looks forward to working closely with Hollande and his government on a range of shared economic and security challenges," White House Press Secretary Jay Carney said in a statement.

"Obama noted that he will welcome President-elect Hollande to Camp David for the G-8 Summit and to Chicago for the NATO Summit later this month, and proposed that they meet beforehand at the White House," Carney said.

Obama and president-elect Hollande each reaffirmed the important and enduring alliance between the people of the US and France, Carney said in his statement.