Updated, 7.50pm

SOCIALIST FRANCOIS HOLLANDE has defeated conservative incumbent Nicolas Sarkozy to become France’s next president.

Sarkozy conceded defeat minutes after the polls closed, saying he had called Hollande to wish him “good luck” as the country’s new leader.

It’s thought the result will herald a change in how Europe tackles its debt crisis and how France flexes its military and diplomatic muscle around the world.

Exuberant crowds filled the Place de la Bastille, the iconic plaza of the French Revolution, to celebrate Hollande’s victory. He will be France’s first leftist chief of state since Francois Mitterrand was president from 1981 to 1995.

Sarkozy thanked his supporters and said he did his best to win a second term, despite widespread anger at his handling of the economy.

“I take responsibility … for the defeat,” he said.

Hollande’s former partner and mother of his four children, Segolene Royal, said she has a “feeling of profound joy to see millions and millions of French renew the tie to the left.”

“The French can be confident,” she said on France-2 television. “We will need everyone to help the country recover.” Royal faced off Sarkozy in the 2007 election.

Partial official results, with about half of the nationwide votes counted, showed Hollande with 50.8 percent compared to 49.2 percent for Sarkozy.

The CSA, TNS-Sofres and Ipsos polling agencies predicted that Hollande will win with 51.8 percent to 53 percent, compared with 47 percent to 48.2 percent for Sarkozy. They made projections based on the vote count at select voting stations around the country.

Hollande wants to renegotiate the fiscal compact that Germany’s Angela Merkel and Sarkozy had championed. He wants more government stimulus, and more government spending in general despite concerns from markets that France needs to urgently trim its huge debts.

The election outcome could also have an impact on how long French troops stay in Afghanistan and how France exercises its military and diplomatic muscle around the world.