French ex-president Nicolas Sarkozy in police custody - source

Former French President Nicolas Sarkozy was being held in police custody on Tuesday for questioning by magistrates looking into allegations of Libyan funding for his 2007 election campaign, an official in the French judiciary said. A lawyer for Sarkozy could not be reached immediately for comment.

France opened a judicial inquiry in 2013 into allegations that Sarkozy's successful 2007 election bid benefited from illicit funds from late Libyan leader Muammar Gaddafi. A former minister and close ally of Sarkozy, Brice Hortefeux, was also being questioned by police on Tuesday morning in relation to the Libya investigation, another source close to the probe said.

Sarkozy, who served as president from 2007 to 2012, has always denied receiving any illicit campaign funding and has dismissed the Libyan allegations as "grotesque".

In January a French businessman suspected by investigators of funneling money from Gaddafi to finance Sarkozy's campaign was arrested in Britain and granted bail after he appeared in a London court.

Sarkozy has already been ordered to stand trial in a separate matter concerning financing of his failed re-election campaign in 2012, when he was defeated by Francois Hollande.

This is the first time Sarkozy is being heard in the probe that was launched five years ago. He can stay under police custody for up to 48 hours and could be presented afterwards to the magistrates to be charged.

Judges Serge Tournaire and Aude Buresi had been working on the case involving the ex-president since April 2013 to determine if the 2007 presidential campaign of Sarkozy was the subject of illegal funding from Libya.

In June 2016, French judges ruled that a document claiming Sarkozy was offered 50 million euros ($56.8 million) as an election campaign donation by Libyan ruler Muammar Gaddafi was authentic.

The document, first revealed by investigative French news site Mediapart in 2012, allegedly showed Sarkozy made the deal with Gaddafi for his 2007 presidential election campaign, in which he defeated the Socialist Party's Segolene Royal.

French daily Le Monde in 2016 published in three successive publications "the existence of a vast criminal system, involving senior officials linked to Sarkozy.

"This network, dedicated to the protection of the former head of state, is composed of police officers or magistrates who remained loyal to the former president, but also businessmen, intermediaries, diplomats and even journalists," the daily said.

This organized network had allegedly been set up after the arrival of Sarkozy at the Interior Ministry in 2002, which strengthened further after he entered the presidential Elysee Palace in 2007.