Scandal talk clouds French campaign before TV debate Mon Apr 30, 2012 3:15pm EDT PARIS (Reuters) - Allegations of scandal and dirty tricks, and a presidential lawsuit, clouded France's election race as it entered the final week on Monday with both sides preparing for rival May Day rallies and a crucial television debate. The developments, along with a new opinion poll showing Socialist challenger Francois Hollande's lead over Conservative President Nicolas Sarkozy has narrowed slightly, raised the temperature on the eve of the rallies and Wednesday's sole TV debate before Sunday's decisive runoff. Sarkozy filed a lawsuit against investigative news website Mediapart for publishing a document it says shows the government of deposed Libyan leader Muammar Gaddafi sought to fund his 2007 election campaign. The Paris prosecutor's office opened a police inquiry in response to Sarkozy's complaint against Mediapart for allegedly publishing false information and using forged documents. Sarkozy also tried to embarrass his opponent Hollande by turning the spotlight on former IMF chief Dominique Strauss-Kahn, who was favorite for the Socialist nomination until he was arrested on rape allegations last year. Sarkozy, in a direct challenge to Hollande, who is staying away from May Day events, said he expected a big crowd to attend a political rally he will hold in Paris to rival trade union marches to defend worker rights. Tomorrow I will draw tens of thousands of people. I will talk to them about work," Sarkozy declared during a campaign trip in the southern city of Avignon. An 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 ($66.2 million) 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, but it could stain the last week of the race. 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 told France 2 television before filing his suit. 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 will make a last attempt to turn the tide against Hollande when they face off on TV on Wednesday evening for a sole head-to-head debate expected to draw millions of viewers. Sarkozy plans a meeting in Paris's Trocadero square as a rival to traditional union marches to defend workers' rights that some senior Socialist Party members will attend. 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 will attend a ceremony in memory of late Socialist Prime Minister Pierre Beregovoy who took his life on May 1, 1993. A more direct contest comes the following day when the two candidates 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. 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." Additional reporting by Vicky Buffery; Editing by Catherine Bremer and Michael Roddy