May 7 (Bloomberg) -- Nicolas Sarkozy claimed a mandate for change after his election as French president, pledging to unify the country as he began promoting a program of tax cuts, tougher prison sentences and tighter immigration rules.

``The people of France have chosen to break with their ideas, habits and behavior of the past,'' Sarkozy, 52, said late yesterday in a victory speech in Paris after congratulating his Socialist opponent, Segolene Royal. ``I will restore the value of work, authority, morals, respect, and merit. I'll restore national pride and national identity.''

Sarkozy, candidate of the governing Union for a Popular Movement, took 53.1 percent against 46.9 percent for Royal, the Interior Ministry said. Turnout of 84 percent was the highest since 1988. He takes office May 16.

Provided his party wins June parliamentary elections, lawmakers' first task will be to vote on Sarkozy's 10 billion euro plan ($14 billion) to scrap payroll charges and income taxes on overtime hours. It would also eliminate inheritance taxes for all but the richest 5 or 10 percent and introduce a tax deduction for mortgage-interest payments.

``If Sarkozy lives up to his promises, this could be the beginning of long overdue structural reforms for the French economy,'' said Eric Chaney, chief European economist for Morgan Stanley and a former French finance ministry forecaster.

`Casus Belli'

Criticized as divisive and dangerous by Royal, 53, during the campaign, Sarkozy may not have much of a honeymoon. He has said he would push through a law in September requiring a minimum level of service by transport workers -- a move labor leader say weakens their right to strike -- unless unions negotiate a deal by the end of summer. An impasse may lead to strikes that could set the tone for the rest of his presidency.

``Transport reforms could be a casus belli,'' said Nicolas Sobczak, a Paris-based economist at Goldman Sachs Group Inc. ``But it's hard for grass-roots unionists to mobilize with Sarkozy winning with a big margin.''

Strikes crippled the French economy for three weeks in 1995, when President Jacques Chirac unsuccessfully tried to reduce pensions for public-sector workers in his first year.

Sarkozy also risks running into opposition from public- sector employees because he has pledged not to replace half of the civil servants retiring over the next five years and to roll back some transport workers' pension benefits.

`Difficult to Reform'

``Social rights, the welfare safety net, the health-care system, and the social security are extremely difficult to reform,'' said Bruno Cautres, a analyst at Cevipof, a Paris- based political research center. ``That's the type of reforms that could create labor unrest if they go too far.''

The president-elect left Paris today for a ``few days'' of vacation at an undisclosed location before resuming transition planning.

Even on election night, as Sarkozy appealed for unity and respect, protesters indicated that they wouldn't be easily appeased.

Police fired tear gas and water cannons at anti-Sarkozy demonstrators at Paris's Place de la Bastille. About 1,500 people were gathered on the steps of the Opera, others were around the statue in the center of the square, where they had daubed a slogan ``Sarkozy in 2007 = Hitler in 1933.''

Political officials immediately turned their attention to legislative elections, with Socialists fending off questions of a potential split by warning an overwhelming majority for Sarkozy would be ``dangerous for democracy,'' in the words of Socialist lawmaker and Royal adviser Jean-Marc Ayrault.

`Built Up Capital'

His winning margin may give him momentum for the legislative vote, said Jean-Luc Parodi, research director at the Paris-based National Foundation of Political Science.

``He's built up a lot of capital for parliamentary elections,'' said Parodi. ``We could end up with one of the most right-wing chambers of the Fifth Republic'' -- which began in 1958.

``Everything depends'' on the legislative election June 10 and June 17, said Jacques Seguela, a former aide to one-time Socialist President Francois Mitterrand who endorsed Sarkozy. He said in an interview Sarkozy called him before the election to seek his help in preaching ``unity.''

Sarkozy inherits an economy whose share of European exports is shrinking and whose growth is likely to lag behind Germany's for a second year. The jobless rate of 8.7 percent is the highest among the 13 nations that share the euro.

`Potential Growth'

He blames the 35-hour work week, above-average taxes, and generous unemployment benefits for discouraging initiative and holding down salaries.

``His agenda looks consistent with an increase in the French potential economic growth,'' said Gilles Moec, a European economist at Bank of America Corp. in Paris. Moec said he may mute opposition by using ``sweeteners that could help him to undermine the working class's support for the unions.''

To boost hiring, Sarkozy, who was Chirac's interior minister and finance minister for four years, has pledged that his government will confer with business federations and labor unions by the end of the year to make firing procedures quicker and more predictable in exchange for increased unemployment benefits and extra training for jobseekers.

Sarkozy says he'd make students' earnings tax free and give universities more autonomy to manage their staff and real estate and to create partnerships with businesses.

Chirac's successor said he'd introduce a law in July that toughens sentences for repeat offenders and a separate law that will aim from preventing immigrants who don't have a job and an apartment from being joined by family members.

``The question of reforms isn't for one term but two terms,'' said Morgan Stanley's Chaney. ``It's better to think about 10 years of reforms rather than five years.''

To contact the reporter on this story: Francois de Beaupuy in Paris at fdebeaupuy@bloomberg.net.

Last Updated: May 7, 2007 10:10 EDT