(Updates with start of voting, details)

By Gergely Szakacs

BUDAPEST, Oct 1 (Reuters) - Hungarians voted in local elections on Sunday in a test of Prime Minister Ferenc Gyurcsany, whose admission that he lied over the economy to win April's general election triggered street protests.

The vote comes two weeks after a tape, in which Gyurcsany said "we lied in the morning, we lied in the evening", was leaked, but most political analysts say the government will likely survive unless it loses Budapest and big cities.

Gyurcsany, a millionaire Socialist, had already seen his party's popularity slide before the protests as a result of a package of tax hikes and subsidy cuts introduced after he campaigned on a platform of lower taxes.

Most foreign investors want Gyurcsany to stay as he is making the first attempt in years to restore economic order in a country whose budget deficit has soared to 10.1 percent of gross domestic product, the highest in the EU.

The elections, covering 3,174 cities, towns and villages, are being portrayed by the opposition Fidesz party as the third round of April's election in which voters will get their first say on the new tax rises and subsidy cuts.

By 0900 GMT turnout among Hungary's 8 million voters was 18.53 percent, up from the 17.91 percent in the 2002 local election when the Socialists swept the board.

In Budapest where the Socialists' smaller coalition allies, the Free Democrats, have to hold on to retain their only major power base, turnout was 18.15 percent.

Polling stations are open until 1900 (1700 GMT) and there will be a good picture of results from around 2230 (2030 GMT).

Fidesz says that if it gets more than half the vote, Gyurcsany's "illegitimate" Socialist-Free Democrat government should quit and be replaced by an interim government of experts and new elections held.

That idea has been ridiculed by the Socialists and their Free Democrat allies who have pledged to stay in power and stick to the economic reforms, aimed at cutting the budget deficit to 3.2 percent of GDP by 2009.

Analysts say that while Socialist support has slumped to 23 percent from more than 40 percent in April, there may be a sympathy vote after the riots in which protesters set fire to and stormed the state television station.

Support for Fidesz is around 34 percent and there is a risk that if party leader Viktor Orban cannot claim victory on Sunday, he may be dumped as he has lost three of the last four elections.