Marine Le Pen casts her ballot to vote in the first round of the 2012 French presidential election in a polling station in Henin-Beaumont.

Marine Le Pen dealt Nicolas Sarkozy a major blow on Monday night by declaring he had “lost” the election and refusing to tell her supporters to back him.

The French president’s hopes of clinging to power rely on picking up the votes of many of the six million who backed Miss Le Pen’s National Front in record numbers in the first round of the national poll.

The strong showing for the far right party triggered alarm around Europe, while the prospect of Mr Sarkozy losing to socialist opponent Francois Hollande in the second round spooked financial markets.

Economists fear Mr Hollande will unpick a Brussels deal on fiscal union and shatter an uneasy consensus on the need for austerity measures across the Continent.

The political uncertainty in France, the world’s fifth largest economy, helped trigger a sell-off on both sides of the Atlantic. The French stock market fell by 2.83 percent, Germany’s by 3.36 percent and London’s by 1.85 percent.

German Chancellor Angela Merkel yesterday expressed shock that nearly 20 percent of French voters had gone for the National Front. The alliance between Berlin and Paris is key to the European project.

Defeat for Mr Sarkozy on May 6 would also be awkward for David Cameron, who broke with convention by publicly endorsing the French president.

Government sources said efforts would be made to extend an olive branch to the French socialists, with Europe Minister David Lidington expected to be tasked with trying to strengthen links.

“They are political allies,” a Downing Street source said of Mr Sarkozy and Mr Cameron, defending the Prime Minister’s decision to back the French president. “But of course, if Hollande ends up winning we will have to work with him.”

Miss Le Pen’s party won 18 percent of the vote, its largest ever share, in Sunday’s first round, but yesterday her party said there would be no deal with the current president.

She said: “I don’t expect anything except that the system will implode,” adding that: “Sarkozy has already lost the presidential election.” Bruno Bilde, Miss Le Pen’s senior aide, said: “There has to be reorganisation of French political life.

“It’s therefore out of the question for the Front National candidate to negotiate … or to offer her vote in favour of Nicolas Sarkozy or Francois Hollande. Marine Le Pen is convinced of that.”

A National Front spokesman said: ‘We shall be abstaining, because we do not want to give a green light to any of the two candidates, because they are the same’.

Opinion polls have suggested that up to six in ten Le Pen voters could back Mr Sarkozy in the second round. Mr Hollande won 28.6 percent and Sarkozy on 27 percent on Sunday.

Mr Hollande is now the favourite to win. If he does, he would become France’s first socialist leader in 17 years.

Both contenders tried to tack to the right to try to appeal to voters who had backed Miss Le Pen. Speaking at a rally in central France, Mr Sarkozy said he ‘had heard’ Le Pen’s message and vowed to be tough on immigration.

He said: “National Front voters must be respected. They voiced their view. It was a vote of suffering, a crisis vote. Why insult them? This anxiety, this suffering, I know them, I understand them.

“They concern our borders, outsourcing, control of immigration, work, security, for them and their families. I know that in this fast-moving world, the concern of our patriots to preserve their way of life is the key issue in this election.”

In Brittany, Mr Hollande said: “My message? We are a large country and we will recover - we have no need of divisions.”

Pierre Moscovici, his campaign director, said the Socialist candidate would continue to be ‘very open’ to legal immigration, but “we must fight with absolute firmness, without concession, against illegal immigration”.

Far left candidate Jean-Luc Melenchon, who came fourth with almost 12 percent of the vote, has told his supporters to back Mr Hollande. - Daily Mail