By Brian Love and Emmanuel Jarry
PARIS (Reuters) - Former French President Nicolas Sarkozy was questioned on Tuesday by police investigating whether late Libyan leader Muammar Gaddafi helped finance his 2007 election campaign.
An official in the French judiciary said Sarkozy, 63, was held in custody in Nanterre, west of Paris.
It is the second major judicial investigation to fall on Sarkozy, who served as president from 2007-2012. He already faces trial on separate charges of illicit spending overruns during his failed re-election campaign in 2012.
A lawyer for Sarkozy could not immediately be reached for comment. The former president has dismissed the Libya allegations as "grotesque" and a "crude manipulation".
France's centre-right party, The Republicans, backed its former leader. "Members and supporters of The Republicans are once again left feeling that not all lawmakers or former lawmakers are treated equally, depending on their political affiliation," the party said in a statement.
France opened an inquiry into the Libya case in 2013, after reports by French website Mediapart based on claims by a Franco-Lebanese businessman, Ziad Takieddine, who said he had transferred 5 million euros (4.28 million pounds) from Gaddafi's former intelligence chief Abdullah Senussi to Sarkozy's campaign chief.
Months after he took office in 2007, Sarkozy became the first Western leader in decades to host a visit by Gaddafi, who pitched his trademark Bedouin-style tent next to the Elysee Palace. Several business deals were signed.
However, Sarkozy was later one of the chief advocates of a NATO-led military campaign that resulted in Gaddafi's overthrow and killing at the hands of rebel forces in 2011.
Investigators in France can hold people for questioning for up to 48 hours before either releasing them or sending them before magistrates who decide whether they have grounds for turning a preliminary inquiry into a full investigation.
The latter can, but does not always, lead to a trial.
The Libya-funding inquiry appeared to have gone quiet until January, when French businessman Alexandre Djouhri, suspected by investigators of funnelling money from Gaddafi to finance Sarkozy's campaign, was arrested in Britain on a warrant issued by France.
A lawyer for Djouhri last month accused French authorities of politicising the case and manipulating it against his client. French authorities had no comment.
Sarkozy’s predecessor, Jacques Chirac, was convicted in 2011, after his retirement, of misusing public funds to keep political allies in phantom jobs. That made the now ailing Chirac the first French head of state convicted since Nazi collaborator Marshal Philippe Petain in 1945.
Sarkozy has been dogged for years by political scandals, but none has led to a conviction.
The Libya inquiry has largely focussed on the evidence provided by Takieddine, who is himself under investigation in a separate affair of arms sales to Pakistan in the 1990s.
Takieddine said in 2016 that he personally handed over three suitcases filled with cash from Gaddafi to Sarkozy and a senior aide to help finance Sarkozy's campaign.
Sarkozy's lawyer at the time, Thierry Herzog, dismissed Takieddine's claims and produced a copy of a witness statement to police by Takieddine in 2012 in which the businessman said he had last seen Sarkozy in November 2003.
(Reporting by Paris bureau; Writing by Brian Love; Editing by Luke Baker, Richard Lough and Peter Graff)