By Robert Campbell
MEXICO CITY, Oct 15 (Reuters) - Tens of thousands of Mexican workers protested the closure of a money-losing power utility on Thursday in a challenge to President Felipe Calderon's plans to clean up the bloated public sector.
Holding hand-scrawled placards damning Calderon, union members, leftists and students marched along Mexico City's main Reforma avenue to the Zocalo square in support of the laid-off power workers.
The government shut down the state-run power company Luz y Fuerza del Centro (LFC) last weekend in a surprise move hailed by investors as a sign of fiscal discipline and a willingness to confront entrenched public sector interests.
But union members have vowed to resist Calderon.
"We've got to defend LFC because if we don't stop things here, we don't know where we will end up," said Miguel Contreras, a retired civil servant surrounded by banners reading "Don't turn off the lights."
Police put the turnout at 35,000 people but protestors were still arriving in the Zocalo on Thursday evening.
The union representing 40,000 LFC workers has called on its members to reject severance pay offered by the government. Small groups of protesters, some wearing devil masks and red shirts, gathered outside LFC offices and shouted at former employees waiting for their severance pay.
"If you take your pay, you are losing your union rights and turning your back on the union," said protester Luis Alvarez, 36, who worked for LFC for 18 years. "You can't come back to the union and ask for work."
Calderon has vowed to shake up the public sector, including state oil monopoly Pemex, and some investors hope the conservative leader will now take on oil and teacher unions that are seen as corrupt and inefficient.
But political analysts say a wider clean-up is unlikely because angering the powerful unions would likely hurt Calderon's party in 2012 presidential elections [N15269298].
Mexico is mired in its worst recession since the 1930s and a drug war that has killed more than 14,000 people since Calderon took office in late 2006. (Additional reporting by Mica Rosenberg; Writing by Robin Emmott; Editing by Kieran Murray)