UPDATE 3-Turkey vows no cover-up despite purge of graft investigators
* President seeks to salve row dogging Erdogan
* EU worries about freedom of Turkish judiciary (Adds Erdogan remarks)
By Orhan Coskun and Humeyra Pamuk
ANKARA, Dec 24 (Reuters) - Turkey's president pledged on Tuesday there would be no cover-up in a high-level corruption case, despite a government-ordered purge of police investigating it that drew protests at home and a caution from the European Union.
The week-long scandal, which erupted with the arrest for graft of 24 people, including the chief of a state-run bank and the sons of two ministers, pits Prime Minister Tayyip Erdogan against the judiciary and has rattled investor confidence.
Erdogan, a third-term premier under whom Turkey's economy has blossomed, portrays the probe as a foreign-orchestrated plot against national unity. He responded by sacking or reassigning some 70 of the police officers involved, including the chief of the Istanbul force.
The moves incensed many Turks who see an authoritarian streak in Erdogan and his Islamist-rooted AK party, and who are still simmering from huge anti-government protests in mid-2013. President Abdullah Gul, a more unifying figure, sought to calm the furore.
"Turkey is not the same place compared to 10 or 15 years ago. Many reforms have been carried out, in politics as well as in the law," Gul said in his first public remarks on the case.
"In a country where such reforms have taken place, if there were corruption and mistakes they would not be covered up," he told reporters, adding that "the independent, objective and democratic legal system (will) adjudicate the allegations in a manner that will not leave any question marks".
Returning from a visit to Pakistan, Erdogan was welcomed at the airport by hundreds of supporters, as well as Turkey's interior and economy ministers. They are the fathers of two of the men in police custody and say their sons are innocent.
"We would confront any attempt by anyone to rob the people of their rights," Erdogan told the crowd. "We would hold them accountable, as does the law."
The corruption investigation centred on Halkbank was conducted largely in secret. At the weekend, the Erdogan government changed regulations for the police, requiring officers to report evidence, investigations, arrests and complaints to commanding officers and prosecutors.
The Turkish lira plunged to an all-time low of 2.0983 against the dollar on Friday, in part because of the affair. But it recovered to 2.0801 on Tuesday after the central bank said it would support the currency.
Thousands of Turks demonstrated in Istanbul on Sunday, calling on the government to resign. AK faithful countered with rallies in which they wrapped themselves in mock burial shrouds to show they would back Erdogan to the death.
Yet there were misgivings within AK, one of whose lawmakers, Haluk Ozdalga, was quoted by local media as saying: "To give the executive organs such a large opportunity to intervene greatly violates the independence of the judiciary".
The European Union, which Turkey has long tried to join, voiced worry too.
"The latest developments, including the sacking of police chiefs, raise concerns as regards the independence, efficiency and impartiality of the investigations," said a spokesman for Stefan Fule, the European Commissioner for Enlargement.
"This further highlights the need for establishing a proper judicial police as already recommended by the EU."
Erdogan transformed Turkey by cutting back the power of the military - guardian of the NATO member-state's secularist constitution - and champions a more assertive foreign policy.
The latest scandal has laid bare the more intimate rivalry between Erdogan and Fethullah Gulen, a U.S.-based Turkish cleric whose Hizmet ("Service") movement claims at least a million followers, including senior police and judges, and runs schools and charities across Turkey and abroad.
While denying any role in the probe, Gulen has taken personally Erdogan's descriptions of it as a "dirty operation" against Turkey that is controlled by shadowy foreign forces.
Raising the rhetorical temperature, Gulen on Monday dismissed Erdogan's statements as "nothing but a reflection of decayed thinking". (Additional reporting by Tulay Karadeniz; Writing by Dan Williams; Editing by Jon Boyle)
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