By Matthias Williams and Kate Abnett
LONDON/BRUSSELS (Reuters) -Many of France's allies breathed a sigh of relief on Monday after Marine Le Pen's far-right party failed to win a snap election, but they noted that a messy coalition from a hung parliament could also pose headaches for Europe.
Le Pen's National Rally had been favourite to top the polls, raising the risk of France's first far-right government since World War Two and threatening to upend economic and foreign policy in the euro zone's second-largest economy.
In particular, Ukraine's allies feared a Le Pen-led government could be soft on Moscow and pare back military aid that Kyiv has relied on since the Russian invasion in 2022, though her party has latterly said Russia was a threat.
The National Rally's defeat signals at least a temporary pushback against a far-right surge in Europe, but could herald a period of instability with a new government in an uneasy "cohabitation" with President Emmanuel Macron.
German Chancellor Olaf Scholz said his government was "relieved" that Macron did not have to accommodate Le Pen.
Vice Chancellor Robert Habeck also lauded efforts to prevent a "drifting towards nationalism and thereby moving Europe into even more difficult waters."
"But nevertheless the election result will now represent an enormous challenge, especially for France itself, but of course also for Europe, which is currently in the phase of reorganisation after the European elections, and also for the German-French relationship," Habeck added.
Polish Prime Minister Donald Tusk struck a positive tone.
"In Paris enthusiasm, in Moscow disappointment, in Kyiv relief. Enough to be happy in Warsaw," Tusk said on X.
Le Pen's party meanwhile was set to join a newly minted alliance in the European Parliament led by Hungarian Prime Minister Viktor Orban with the stated aims of fighting illegal immigration and taking powers back from Brussels.
MACRON'S GAMBLE
Macron had called the snap poll in an attempt to wrest the initiative back from Le Pen but his own party was left trailing behind an alliance of leftist parties that performed far better than expected to take first place.
A fragmented parliament is set to weaken France's role in the European Union and further afield, and make it hard for anyone to push through a domestic agenda.
Several early reactions from overseas rejoiced that the immediate threat of a far-right government had been averted.
Nikos Androulakis, the head of Greece's Socialist PASOK party, said the French people had "raised a wall against the far right, racism and intolerance and guarded the timeless principles of the French Republic: Liberty, Equality and Fraternity."
An EU official called it a "huge relief", but added: "what it means for Europe on a day to day basis remains to be seen though." A senior EU diplomat also expressed relief that a lurch towards what they called the extreme right was not seen everywhere.
Le Pen has in the past expressed her admiration for President Vladimir Putin. Kremlin spokesman Dmitry Peskov said Russia was watching the formation of a new French government with great interest, but added:
"The victory of political forces that would be supporters of efforts to restore our bilateral relations is definitely better for Russia, but so far we do not see such bright political will in anyone, so we do not harbour any special hopes or illusions in this regard."
A spokesperson for Britain's new Prime Minister Keir Starmer called France one of the UK's closest partners but added that he would work with any government.
DEEP DIVISIONS
The election left the French parliament split between three large groups - the left, the centrists, and the far right - with different platforms and no tradition of working together.
The left wants to cap prices of essential goods like fuel and food, as well as raise the minimum wage and the salaries of public sector workers, at a time when France's budget deficit is already at 5.5% of output, higher than EU rules permit.
"Bye-bye European deficit limits! (The government) will crash in no time. Poor France. It can console itself with (Kylian) Mbappé," said Claudio Borghi, a senator from Italy's right-wing League party, referring to the French soccer star.
Other far-right politicians expressed frustration. Andre Ventura, leader of Portugal's Chega party, called the result a "disaster for the economy, tragedy for immigration and bad for the fight against corruption".
A note by Capital Economics said France may have avoided the "worst possible outcomes" for investors of an outright majority for either Le Pen or the leftists.
A fractious parliament means, however, it will be difficult for any government to pass the budget cuts that are necessary for France to comply with the EU's budget rules, it said.
"Meanwhile, the chance of France's government (and the governments of other countries) clashing with the EU over fiscal policy has increased now that the bloc's budget rules have been re-introduced," it said.