Left's revival tempers Sarkozy's poll win

By Jon Boyle

PARIS (Reuters) - French President Nicolas Sarkozy's allies won a large majority in parliamentary elections on Sunday but fell short of the predicted landslide after a row over a sales tax hike appeared to cost them votes.

Government No. 2 Alain Juppe was the biggest casualty of a late Socialist surge, and confirmed he would resign his powerful energy and environment ministry on Monday after losing in his Bordeaux fiefdom.

Prime Minister Francois Fillon had said any minister who failed to win his seat would have to quit, and the loss of the government's de facto deputy prime minister a month after his appointment soured the right's victory.

And on a night of surprises Segolene Royal, the left's defeated presidential candidate, said she and Socialist Party chief Francois Hollande would make a statement on Monday about media reports they are to separate. They have four children.

Pollster Ipsos-Dell projected Sarkozy's centre-right allies would win about 340 seats in the National Assembly, well below the 470 seats predicted in some pre-poll estimates.

The CSA institute projected 232 Socialists, Communists and Greens would face them in the 577-seat legislature.

The surprise results were a relative setback for Sarkozy but the new president will still have the legislative muscle to push ahead with his sweeping tax and labor reforms. It was the first time a party has been re-elected since 1978.

"Your participation has resulted in a clear and coherent choice, which will allow the President of the Republic to implement his project," Prime Minister Francois Fillon, speaking from his official Matignon residence, said of the results.

"My dear compatriots, the time of elections are over, the time to unite has arrived, the time for action has begun."

SARKOZY'S NEXT MOVE

Sarkozy's Union for a Popular Movement (UMP) and allies had 359 seats in the outgoing legislature, compared to 149 for the Socialists and their affiliates.

Hollande said voters had heeded the left's warning that a conservative landslide would give Sarkozy unfettered control of the levers of power.

"They also wanted to express doubts and fears concerning the first unfair measures of the government of Francois Fillon, notably the announcement of the 'Social VAT'," Hollande said of the value-added tax.

The run-off ballots confirmed the two big parties had squeezed the smaller groups. The centrist Democratic Movement of Francois Bayrou was projected to win 5 seats, a disappointment after bagging 18.5 percent of votes in presidential elections.

The Communists were seeking to save 18 of their 21 seats, the Greens were seen increasing their number to four while the far-right National Front failed to win a seat.