François Hollande's potential spending spree in France has caused concern in austerity Europe Mr Hollande's expansionist plans have raised particular alarm. Proposals to create 60,000 new teachers, and reverse President Sarkozy's increase in the pension age from 60 to 62, fly in the face of the fiscal consolidation markets expect and EU treaties require. Public spending is already running at 56pc of GDP, more than any other eurozone country. Unemployment is at its highest level in 20 years and French exports, in stark contrast to Germany, are stagnating. Many in the financial sector believe that while Mr Sarkozy was grudgingly allowed to live on credit, even at the price of losing France's cherished AAA rating, Mr Hollande must confront a much more hostile lending environment. Declarations that he is the "true enemy of finance" and plans to hit the rich with a 75pc tax rate are expected to rebound on him within weeks as market turmoil punishes France by increasing borrowing costs. Michael Benhamou, the French chief executive of Louis Capital Markets, has predicted an early battle. "At the end of the day, if Hollande is elected it could be quite dangerous, especially for the banking sector," he warned. Whether he likes it or not, Mr Hollande needs the markets to smile on his policies because 59pc of government debt is held overseas by foreign investors, who have little sympathy for "la vie Française" or French Socialism. Even worse, France needs to raise cash equivalent to more than 18pc of GDP this year just to pay the interest on its debt. Next year the cost rises to 19.5pc of GDP, a figure that would increase under a Socialist administration. Mr Hollande's plans - and President Sarkozy's limited room for manoeuvre following a surge on the nationalist far-right - may be punished by market turmoil before the second round of elections on May 6. "The markets have begun sanctioning the weakness of Hollande's proposals to improve the competitiveness of the French economy and Sarkozy's lack of political leeway if he is elected," Exane BNP Paribas said in a research note. Nicolas Doisy, an economist at CA Cheuvreux, predicted: "Thus, just like Mitterrand in the early 1980s, Hollande will likely relent only under market pressure, thus disappointing popular voters." A new Socialist French President would also clash with EU demands that he cut spending, backed up by new Brussels powers to enforce budget cuts and labour market reform targets. Behind the EU lies Angela Merkel, the German Chancellor who is used to getting her way on imposing austerity in order to save the euro. Mr Hollande's threat not to ratify a German-inspired eurozone "fiscal compact" and his dismissal of a constitutional debt brake - a sacred cow for Chancellor Merkel - as a "PR operation" has not played well in Berlin. New powers now give the European Commission the right to levy fines on countries that fail to comply with austerity measures to bring budget deficits to within the euro's 3pc target. France is in breach of the rules, with an annual 5.2pc deficit. Any threat of EU action against France would immediately push French borrowing costs to unsustainable levels. When Silvio Berlusconi, the former Italian Prime Minister, crossed the EU last year by failing to live up to promises, the combination of German opprobrium and market reaction led to his resignation within weeks. The message from Germany for a new Socialist French President would be clear - any help with recapitalising its banks or support against turbulent markets would be conditional on Mr Hollande submitting to the Germanic and EU fiscal orthodoxy.