Turkish police battle protesters after Erdogan warning

ISTANBUL (Reuters) - Turkish riot police using tear gas and water cannon battled protesters for control of Istanbul's Taksim Square, hours after Prime Minister Tayyip Erdogan demanded an immediate end to 10 days of demonstrations.

Istanbul Governor Huseyin Avni Mutlu appeared on television, declaring that police operations would continue day and night until the square, focus of demonstrations against Erdogan, was cleared.

Police fired volleys of tear gas canisters into a crowd of thousands - people in office clothes as well as youths in masks who had fought skirmishes throughout the day - scattering them into side streets and nearby hotels. Water cannon swept across the square targeting stone-throwers in masks.

The protesters, who accuse Erdogan of overreaching his authority after 10 years in power and three election victories, thronged the steep narrow lanes that lead down to the Bosphorus waterway. Many drifted gradually back into the square and lit bonfires, only to be scattered by more tear gas.

Governor Mutlu said 30 people had been wounded on Tuesday.

Erdogan had earlier called on protesters to stay out of Taksim, where a heavy-handed police crackdown on a rally against development of the small Gezi Park abutting the square triggered an unprecedented wave of protest.

Gezi Park has been turned into a ramshackle settlement of tents by leftists, environmentalists, liberals, students and professionals who see the development plan as symptomatic of overbearing government.

The protests, during which demonstrators used fireworks and petrol bombs, have posed a stark challenge to Erdogan's authority and divided the country. In an indication of the impact of the protests on investor confidence, the central bank said it would intervene if needed to support the Turkish lira.

Erdogan, who denies accusations of authoritarian behavior, declared he would not yield.

"They say the prime minister is rough. So what was going to happen here? Were we going to kneel down in front of these (people)?" Erdogan said as action to clear the square began.

"If you call this roughness, I'm sorry, but this Tayyip Erdogan won't change," he told a meeting of his AK party's parliamentary group.

Western allies have expressed concern about the troubles in an important NATO ally bordering Syria, Iraq and Iran. Washington has in the past held up Erdogan's Turkey as an Islamic democracy that could be emulated elsewhere in the Middle East.

Victor in three consecutive elections, Erdogan says the protests are engineered by vandals, terrorist elements and unnamed foreign forces. His critics, who say conservative religious elements have won out over centrists in the AK party, accuse him of inflaming the crisis with unyielding talk.

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"A comprehensive attack against Turkey has been carried out," Erdogan said. "The increase in interest rates, the fall in the stock markets, the deterioration in the investment environment, the intimidation of investors - the efforts to distort Turkey's image have been put in place as a systematic project."

Riot police also clashed with protesters in Kizilay, the government quarter of the capital, Ankara, firing tear gas

Despite the protests against Erdogan, he remains unrivalled as a leader in his AK party, in parliament and on the streets.

Mutlu appealed to people to stay away from the square for their own safety. "We will continue our measures in an unremitting manner, whether day or night, until marginal elements are cleared and the square is open to the people," he said in the brief television announcement.

"From today, from this hour, the measures we are going to take in Taksim Square will be conducted with care, in front of our people's eyes, in front of televisions and under the eyes of social media with caution and in accordance with the law."

The unrest has knocked investor confidence in a country that has boomed under Erdogan. The lira, already suffering from wider market turmoil, fell to its weakest level against its dollar/euro basket since October 2011.

The cost of insuring Turkish debt against default rose to its highest in 10 months, although it remained far from crisis levels.

The police moved back into Taksim a day after Erdogan agreed to meet protest leaders involved in the initial demonstrations over development of the square.

"I invite all demonstrators, all protesters, to see the big picture and the game that is being played," Erdogan said. "The ones who are sincere should withdraw ... and I expect this from them as their prime minister."

Protesters accuse Erdogan of authoritarian rule and some suspect him of ambitions to replace the secular republic with an Islamic order, something he denies.

"This movement won't end here ... After this, I don't think people will go back to being afraid of this government or any government," said student Seyyit Cikmen, 19, as the crowd chanted "Every place is Taksim, every place resistance".

Turkey's Medical Association said that as of late Monday, 4,947 people had sought treatment in hospitals and voluntary infirmaries for injuries, ranging from cuts and burns to breathing difficulties from tear gas inhalation, since the unrest began more than 10 days ago. Three people have died.

Erdogan has repeatedly dismissed the protesters as "riff-raff" but is expected to meet leaders of the Gezi Park Platform group on Wednesday.

(Additional reporting by Daren Butler, Ece Toksabay and Humeyra Pamuk; Writing by Nick Tattersall; Editing by Giles Elgood and David Stamp)