French candidates battle scandal as poll day looms

French presidential frontrunner Francois Hollande headed into the last round of his battle with Nicolas Sarkozy, with both candidates threatened by the shadow of scandal.

Socialist challenger Hollande is the favourite to win next week's vote, but his campaign was shaken over the weekend by a new episode in the saga of his party's ties to disgraced former IMF chief Dominique Strauss-Kahn.

On Saturday, Socialist lawmaker Julien Dray invited Hollande's campaign director Pierre Moscovici, communications director Manuel Valls and former partner Segolene Royal to a drinks party to celebrate his birthday.

But he did not warn them he had also invited Strauss-Kahn to attend the bash, held at a popular disco bar on the notorious Rue St Denis in Paris, a street which has historically been associated with prostitution.

Royal was furious when she learned that Strauss-Kahn was on the guest list, and stormed off without meeting him, but the news embarrassed the campaign and forced Hollande to publicly stress Strauss-Kahn's pariah status.

"He no longer has a role in political life and thus should not be part of a campaign nor in any images that could potentially lead people to believe he's coming back," Hollande said, in a television interview.

Strauss-Kahn was once expected to be the Socialist candidate but became a toxic figure last year when he was accused of sexual assault in New York and is now under investigation in France over alleged ties to a vice ring.

Royal, who was the defeated Socialist candidate in the 2007 race and has had four children with Hollande, expressed anger over the invitation.

"It's lucky that I didn't find myself face-to-face with him!" she said. "I left because it is out of the question for me to meet Dominique Strauss-Kahn, if only out of concern for the rights and respect due to women."

Valls, a party moderniser who has been tipped to become a senior minister in any Hollande-led government, refused to comment on the event and insisted it had no relevance to the campaign nor to voters' interests.

But Sarkozy's camp -- which is wooing the 6.4 million voters who backed the far-right's Marine Le Pen in the first round vote last week -- lost no time in seizing on the incident to increase the left's embarrassment.

Sarkozy spokeswoman Nathalie Kosciusko-Morizet joked about the Rue St Denis address, with its louche associations, adding: "You couldn't make it up."

The new mini-scandal erupted as an opinion poll by the LH2 institute forecast that Hollande would win the May 6 run-off by 54 percent of the vote to Sarkozy's 46, a smaller gap than in LH2's last estimate.

Another survey, carried out by Ipsos for France Television, Radio France and Le Monde, predicted Hollande would win with 53 percent, down one point from the previous survey, against 47 percent for Sarkozy, up one point.

The right-wing president meanwhile faced controversy of his own.

On Saturday, investigative news website Mediapart published what it said was a copy of an internal Libyan regime document recording an alleged 2006 illegal funding deal between Tripoli and Sarkozy's 2007 campaign.

According to the note, which Mediapart claims to have obtained from former regime figures ousted last year in the revolt against Kadhafi's rule, Tripoli agreed to pay Sarkozy's 2007 campaign 50 million euros ($66 million).

"It's despicable. It's a forgery. Mediapart is well used to dishonesty. It's an agency in the service of the left," Sarkozy declared in an interview with Canal+ television, angrily dismissing the claim.

And the man to whom the memo was supposedly addressed -- Bashir Saleh, Moamer Kadhafi's former chief of staff and head of Libya's 40 billion dollar sovereign wealth fund -- denied ever receiving such a communication.

Saleh now lives in France, and his lawyer Pierre Haik sent AFP a statement expressing "grave reservations" over the authenticity of the note.

Speaking to AFP from his exile in Doha, the capital of Qatar, Libya's former foreign intelligence chief Moussa Koussa branded the note a fake.

"All these allegations are false," he said.

Socialist Arnaud Montebourg, who came third in the party's primary last year, said "the only response is to immediately launch an investigation."

He said in a televised debate that if the allegations were verified, it could help explain how "Colonel Kadhafi came back into favour... and was welcomed in Paris with great pomp."

Both candidates have a number of major rallies planned for the final week of campaigning, and will face each other on Wednesday in a televised debate that could prove to be Sarkozy's last chance for a breakthrough.

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