Sarkozy faces heavy loss in French regional poll

PARIS (Reuters) - French President Nicolas Sarkozy on Sunday faced a regional vote that opinion polls suggested would mean heavy losses for his center-right UMP party in the last ballot box test before he comes up for re-election in 2012.

Unemployment in France is running at more than 10 percent, public finances are under growing strain and a series of controversies over issues ranging from lavish executive pay to immigration and security have undermined Sarkozy's popularity.

"Rarely has a regional election been so national," the left-wing daily Liberation declared in an editorial on Saturday. "The last vote before the presidential election in 2012. It can change the political landscape."

Voting got under way at 8.00 a.m. (3 p.m. EDT) on Sunday and the last polls close in major cities at 8.00 p.m. (3 p.m. EDT), with an initial first round result due later in the evening.

Sarkozy has said the election will be about local issues and he has ruled out a major reshuffle if the results are as bad as expected, but he said last week that he would be "attentive" to what voters say and some cabinet changes are possible.

According to a survey published on Friday by the TNS Sofres polling institute, the opposition Socialists had 31.5 percent support going into the first round of the election, compared with 29 percent for the UMP.

Sunday's vote will be followed by a second round on March 21, when the top two parties in each of the 26 regions will face each other in a decisive runoff.

The Socialists should pick up second round votes from the Greens and various far-left parties which outweigh the far-right National Front and a small centrist party where support may go to the UMP. Only in the eastern region of Alsace does the UMP look like winning.

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The 26 regional councils, responsible for issues ranging from maintaining school buildings to local transport, have little economic power. They normally attract scant interest and surveys suggest abstention may be as high as 50 percent.

But the message the vote sends will be closely watched outside France for the possible impact on the pace of reform and for the future of key government ministers including Economy Minister Christine Lagarde and Prime Minister Francois Fillon.

"What matters most for financial markets is the distribution of votes in the first round and whether or not this can be depicted as a 'no confidence vote' in the government," BNP Paribas analyst Dominique Barbet said in a note to clients.

With the public deficit seen at 8.2 percent of gross domestic product after the billions of euros in stimulus measures pumped into the economy last year, the government faces a major task to get state finances back under control.

Sarkozy has pledged to continue with a major overhaul of the pension system due to be completed later this year but in an interview with Le Figaro last week, he signaled a pause in the pace of reform next year.

He has largely stayed out of the campaign, in line with the French convention that the head of state should not be too involved in electioneering but his sliding personal approval ratings, currently around 36 percent, have not helped his party.

The Socialists, who control 20 of the 22 mainland regions after a triumphant campaign at the last regional election in 2004, are aiming for a grand slam this time and the government may be able to claim a success if they prevent it.

(Editing by Jon Hemming)