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* Squabble breaks out before Sarkozy-Hollande TV showdown

* Sarkozy attacks Socialists over Strauss-Kahn

* Finalists warm up for May Day celebrations

(adds union comment on May Day, Sarkozy quote)

By Nicholas Vinocur

PARIS, April 30 (Reuters) – Allegations of scandal and dirty

tricks clouded France’s presidential election on Monday as the

race entered the final week with both sides preparing for rival

May Day rallies and the sole, crucial television debate.

Conservative President Nicolas Sarkozy said he would sue

news website Mediapart for publishing a document it says proves

that the government of former Libyan leader Muammar Gaddafi

sought to fund his 2007 election campaign.

Sarkozy in turn tried to embarrass his Socialist opponent,

Francois Hollande, by turning the spotlight on former IMF chief

Dominique Strauss-Kahn, who was favourite for the Socialist

nomination until he was arrested on rape allegations last year.

The latest opinion poll showed Hollande’s lead over the

incumbent has narrowed slightly ahead of next Sunday’s decisive

runoff ballot.

The Ipsos-Logica poll for France Inter showed the Socialist

down one point on 53 percent and Sarkozy up one point on 47. A

Reuters survey of polls published since the April 22 first round

of voting gives Hollande an average score of 54 percent.

Waging an uphill battle for re-election, Sarkozy dismissed a

purported 2006 letter from Libya’s former secret service chief,

published by Mediapart, that discussed an “agreement in

principle” to pay 50 million euros for Sarkozy’s campaign.

The case seems unlikely to sway the election at such a late

stage in a country where voters are inured to regular sleaze

allegations.

“We will file a complaint against Mediapart,” Sarkozy told

France 2 television. “Do you really think that with what I did

to him, Mr Gaddafi would have made me a bank transfer? Why not a

signed cheque – it’s grotesque.”

Sarkozy hosted Gaddafi on an official visit to Paris in 2007

but spearheaded Western military intervention that helped drive

the Libyan from power after a 2011 popular uprising.

The president called the document an “obvious fake”, saying

that the two Libyans who were supposed to have sent the letter

and received it had both denied any involvement.

Sarkozy has probably his last chance to turn the tide

against Hollande when they face off on television on Wednesday

evening for the sole head-to-head debate of the campaign,

expected to draw millions of viewers.

MAY DAY BATTLE

Both candidates were preparing for May Day celebrations on

Tuesday, with Sarkozy planning his own rally on Paris’ Trocadero

square as a rival to traditional trade union marches to defend

workers’ rights. The president said last week his event would

showcase “real work” – a term he has since said he regretted.

“This sort of rhetoric, which divides people, has become

unbearable,” Francois Chereque, head of the CFDT union, told

Liberation. The CFDT has not endorsed a candidate, while the

CGT union has urged its members to “vote against Sarkozy”.

Alongside union-led marches, the far-right National Front

party will be holding its annual “Joan of Arc Day” rally, at

which party leader Marine Le Pen has said she will spell out

voting advice for her supporters ahead of the runoff.

Hollande said he would attend a memorial ceremony on May Day

for former Socialist Prime Minister Pierre Beregovoy, who took

his life on May 1, 1993.

A more direct contest comes the following day when they meet

for a television debate which could be decisive.

In 2007, commentators said a heated exchange between Sarkozy

and Socialist Segolene Royal helped widen the centre-right

leader’s margin of victory after Royal – Hollande’s former

partner – lost her cool when talking about handicapped children.

Sarkozy was ahead in polls one week before the deciding

round in 2007. This time he faces more difficult odds.

Surveys show voters are most concerned about resolving

France’s economic woes and restoring growth as jobless claims

have risen to their highest level since September 1999.

Yet it seemed scandals and mudslinging could dominate the

last days of the race.

Sarkozy has attacked Hollande on several fronts, accusing

the man who could become the first left-wing president in 17

years of maintaining relations with controversial figures.

He said last week that controversial Muslim scholar Tariq

Ramadan had endorsed Hollande, which the Swiss academic denied.

On Monday, Sarkozy drew attention to a Socialist lawmaker’s

birthday party at which some of Hollande’s campaign staff rubbed

shoulders with Strauss-Kahn, who has become a political pariah

over his alleged sexual misconduct.

“When you see the circus around this birthday dinner… with

Mr Strauss-Kahn on rue Saint Denis – you couldn’t make this

stuff up – you wonder whether the Socialists are thinking,”

Sarkozy told i>Tele, highlighting the fact that the party took

place in a Paris street renowned for prostitution.

Hollande told Europe 1 radio: “I have already said that

Dominique Strauss-Kahn has not been involved in this election

campaign and it is not his place to show up now.”

(Reporting By Nicholas Vinocur; Editing by Angus MacSwan and

Paul Taylor)