President Nicolas Sarkozy's centre-right UMP party suffered losses in the first round of French municipal elections on Sunday but avoided the crushing defeat some had predicted.

Results showed the Socialists had convincingly kept control of France's second city Lyon and looked sure to maintain a firm grip on the capital Paris after the March 16 runoff ballot.

But with much still to play for in a host of other cities, leftist leaders urged their supporters to turn out in force next weekend and transform initial gains into ballot triumphs.

"Everything remains open. Nothing has been won or lost," said Socialist leader Francois Hollande.

The municipal vote is the first major electoral test for Sarkozy since he stormed to power 10 months ago, and comes at a time when his own approval ratings have slumped.

Although he was elected on a pledge to reform the economy, many voters feel he has not protected them from the rising cost of living and feel he has focused too much on his private life, marrying pop star Carla Bruni after a whirlwind romance.

At a national level, leftist parties won 47.94 percent of Sunday's vote and centre-right parties took 45.49 percent, with turnout relatively high at around 65 percent.

"This defeat is not severe enough to persuade Sarkozy to change direction," said political analyst Jerome Jaffre.

The key battlegrounds on March 16 will be the southern cities Marseille and Toulouse and, in the east, Strasbourg. All are controlled by the right but could fall to the Socialists.

Both the right and the left face a week of negotiations to try to stitch up local deals, with the centrist Democratic Movement party (MODEM) often holding the balance of power.

REFORMS AHEAD

MODEM leader Francois Bayrou, who finished third in the 2007 presidential election, refused to back either side and told Sarkozy not to underestimate the result.

"I am convinced that this vote, which has largely gone the way of the left, is not a vote in support of the Socialists but a warning vote against those in power," he said.

Pollsters Opinionway said 27 percent of those who voted did so looking to punish the government for its performance, while 56 percent said that wasn't an issue for them.

Prime Minister Francois Fillon said the government would press ahead with Sarkozy's reform agenda regardless of the final results and accused opponents of exacerbating tensions at a national level to try to gain advantage on the local stage.

"What is at stake today is the management of our towns, villages and provinces," he said.

There were a number of bright spots for the right on Sunday, including in Bordeaux, where former Prime Minister Alain Juppe was comprehensively re-elected mayor.

Likewise, of the 13 ministers standing for mayor, six were elected and the other seven went forward to run off ballots.

The municipal ballot holds a special place in France because many national politicians seek election in the hope of building local power bases for themselves.