In two further blows in the last days of the race, far-right leader Marine Le Pen, who won 17.9 percent in the first round, and centrist Francois Bayrou, who polled 9.1 percent, refused to endorse the conservative president.
Le Pen, who campaigned on a platform of leaving the euro and restoring trade barriers, vowed to lead "a real opposition that is ideologically distinct", predicting that Sarkozy's UMP party would implode.
Hollande, 57, joins a minority of left-wingers in government in Europe and has vowed to renegotiate a budget discipline treaty signed by 25 EU leaders in March, to add growth measures. Berlin has made the pact a pre-condition of aid for struggling states.
Hollande plans to visit Merkel in Berlin within days of the election to discuss his ideas and planned to speak to her by telephone on Sunday evening, said Jean-Marc Ayrault, tipped as a likely Socialist prime minister.
Merkel herself spent an uncomfortable evening as her centre-right ChristianDemocrats looked likely to lose further local power after a state election in Schleswig-Holstein, continuing a pattern that may erode her chances of a third term next year.
While financial markets are warming to Hollande's growth agenda, given growing support elsewhere in Europe, analysts say he would need to reassure investors quickly about his economic plans as fears resurface over the euro zone's debt woes.
France is grappling with feeble growth and unemployment at its highest since 1999, a gaping trade deficit and high state spending that is straining public finances and was a factor inStandard & Poor's downgrading its triple-A credit rating.
French 10-year bond yields fell to 2.87 percent on Friday, a level not seen since early October. Yet French debt could remain vulnerable to selling pressure, as markets and credit rating agencies wait to be convinced of his fiscal credentials.
Economists want Hollande to trim over-optimistic growth forecasts and impose spending cuts, but political analysts say this could be difficult with left-wing voters hoping he will raise the minimum wage and reverse a recent sales-tax rise.
Little known outside France, Hollande will soon have his diplomatic skills tested at a ChicagoNATO summit in late May and a Group of 20 summit in Mexico in late June. The former Socialist Party chief has never held a ministerial post.
(Additional reporting by John Irish, Elizabeth Pineau, Morad Azzouz and Heleen van Geest in Tulle, Ingrid Melander in Athens and Geert De Clercq; Writing by Daniel Flynn and Catherine Bremer; Editing byPaul Taylor and Alastair Macdonald)