* Government says election a step towards democracy
* Oldest opposition party sees opportunity for change
* Voters sceptical election will be break with past
* Real battle will be over presidency in two years
By Christian Lowe
TIZI-OUZOU, Algeria, April 25 It was a homecoming. After boycotting all national elections for more than a decade, Algeria's oldest opposition party was back on the campaign trail in its heartland.
But the rally at a soccer stadium in this Berber town was a muted affair. About 1,500 people showed up, assembling around the half-way line. When a party leader led chants of "the authorities are assassins", the sound echoed off empty seats.
Algeria's authorities say they have heeded calls for change after last year's Arab uprisings in nearby countries and will ensure a May 10 parliamentary election is truly democratic.
To back their argument that the vote will be different, they cite the decision of the opposition Front des Forces Socialistes (FFS) to end its boycott of polls it said were rigged.
The party is headed by Hocine Ait Ahmed, 85, who helped lead the fight half a century ago for Algeria's independence from colonial ruler France. He once organised a post office robbery to fund the insurrection.
Soon after independence, he turned against Algeria's new rulers, saying they were not democratic. He paid for his dissent with years of jail and exile, becoming a symbol of uncompromising, principled opposition.
Ait Ahmed and his lieutenants see the Arab revolts elsewhere as creating an opportunity for genuine change in Algeria, which shares the problems of youth unemployment and unaccountable rule that sparked revolutions in Tunisia, Libya and Egypt.
"We believe the internal, regional and international situation is very favourable for a peaceful change," Mustafa Bouchachi, an FFS leader, told Reuters as he arrived for the party rally at Tizi-Ouzou's soccer stadium on Saturday.
"We are not taking part in these elections to support the authorities but to move towards a peaceful change in Algeria, for a real democracy, not just a facade of democracy," he said. "It (the election) is the first step."
Yet even some FFS loyalists seem unconvinced that Algeria's military-backed ruling elite will loosen its grip on power.
Tizi-Ouzou, about 100 km (60 miles) east of the capital Algiers, is the bedrock of FFS support and the unofficial capital of Algeria's significant Berber ethnic minority.
Ait Ahmed was born near here, and after Algeria won independence in 1962 he briefly led an armed revolt against the new rulers from this region. Road signs in Tizi-Ouzou are written in the Berber, or Amazigh, alphabet, and the FFS uses the language to address its supporters.
Yet people milling on a street corner near FFS headquarters in Tizi-Ouzou had low expectations for the party as it contests an election for a parliament that anyway holds little power.
"People don't trust the politicians," said one man, who gave his name as Hakim. "Nothing has changed."
Another man, 49-year-old Boubker, noted that Ait Ahmed lives in Switzerland and has not been back to Algeria for years. "What does that tell you? He should be in Algeria," he said.
The party's own officials talk of the election as an opportunity to "re-mobilise" opposition supporters in Algeria and start a real debate about how the country should be run.
But they also acknowledge the risk that the authorities will prove insincere about allowing more democracy, and will instead use FFS participation as a fig leaf for their real agenda.
If the election was rigged like previous votes, "we will react," Ali Laskri, the highest-ranked FFS official in Algeria, told Reuters, without spelling out how the party would respond.
As in many other countries, Algerians are cynical about their politicians. Some speculate that the FFS has dropped its election boycott in a secret deal with the ruling establishment, although there is no firm evidence of this.
"I think it is something that we don't know about," said one FFS supporter in Tizi-Ouzou when asked why the party leadership had decided to run in the election.
The party may view the vote as a dress rehearsal for a future contest for real power, perhaps two years down the road.
Algerian President Abdelaziz Bouteflika is 75 and is unlikely to seek re-election when his term ends in 2014. The elite, say analysts, will seek a managed handover of power, but if that fails there could be an opportunity for the opposition.
"It is the presidential elections that will change the status quo," said Youcef Sahli, a member of the FFS national secretariat. "We understand that it is the president who embodies the state." (Editing by Alistair Lyon)