French conservative presidential candidate Francois Fillon has vowed to fight on for the presidency despite a damaging scandal involving taxpayer-funded payments to his wife for work that a newspaper alleges she did not do.

At a news conference in Paris, Fillon, 62, apologised for what he said was his error of judgment regarding the employment of family members - though he said his wife's work as parliamentary assistant over 15 years had been genuine and legal.

But he said the campaign of "unfounded allegations" against him and his family would not make him abandon his bid for the presidency as the nominee of the centre-right.

"I am the only candidate who can bring about a national recovery. I am the candidate of the Right and I am here to win" he said. "A new campaign starts this evening."

Fillon, a former prime minister, called the news conference after members of his own party, The Republicans, urged him to quit the race to give the party time to find a replacement candidate.

I am the only candidate who can bring about a national recovery- Francois Fillon

Before the scandal surfaced in a weekly satirical newspaper nearly two weeks ago, opinion polls had shown Fillon to be the clear favourite to win the election, a two-stage ballot held on April 23 and May 7, over the far-right leader Marine Le Pen.

Since then his approval ratings have plummeted and he is now seen failing to reach the May knockout.

Two opinion polls published on Monday showed independent centrist Emmanuel Macron, a former investment banker, challenging Le Pen in the runoff vote and winning comfortably.

It has been a humiliating reversal of fortune for Fillon, a devout Catholic and father of five children, who had portrayed himself on the campaign trail as a squeaky-clean politician.

He and his wife have been interviewed by the fraud police - he for four hours, she for five - his office in parliament has been searched, and the inquiry has been extended to two of his adult children he also paid for stints of work at the Senate.

The accusations of phantom jobs for the family also sit uncomfortably with his free-market economic plans for setting France back on to its feet which include slashing public spending and sacking half a million public servants.

Investor uncertainty about the outcome of the election took its toll on French and lower-rated bonds on Monday, pushing up the premium investors demand for holding French over German government debt to its highest in almost four years.

DEEP REGRET

The stakes are high for France's Right which is battling to return to power after five years of Socialist rule under President Francois Hollande.

Fillon's political future still hangs in the balance and the grandees of his party will want to see if he has been convincing enough to stop the haemorrhage of votes.

Polls have Fillon behind Marine Le Pen (pictured) and Emannuel Macron. Photo: Reuters

Fillon said all the important figures of his "political family" supported him - though whether this support continues may depend on what the opinion polls show over the coming days.

The weekly Le Canard Enchaine alleged that Fillon had approved hundreds of thousands of euros to be paid to his British-born wife Penelope for fraudulent work as a parliamentary assistant while two of his grown-up children had received salaries for work for which they were not qualified.

Fillon said his wife's work had included representing him at functions and events. Her average monthly salary of €3,677 over 15 years had been justified, he said.

"Her job was vital for my role as an elected official ... All of this was legal," he said.

It has been common for French legislators to employ wives, children and even mistresses in their office.

What had been acceptable practice in the past was no longer accepted by the French public, Fillon said.

"It was a mistake, which I deeply regret, and I apologise to the French people," he said. Replying to a question, he said he saw no reason to reimburse the money paid to his wife.

A champion of free-market policies to reinvigorate a heavily regulated economy, Fillon said the violence of the campaign against him had been the work of those who wanted to undermine his "programme of breaking with the past".