* Angry denunciations as tensions rise
* Protests precede parliamentary debate
* Shi'ite leaders vow to purge Baathists
BAGHDAD, Feb 7 (Reuters) - Iraq's Shi'ite parties held emotional demonstrations on Sunday and vowed to purge loyalists of Saddam Hussein's outlawed Baath party as tensions over a list of candidates banned from a March election soared.
The orchestrated protests by hundreds of people came ahead of a debate in parliament over an appeal panel's decision to suspend a ban of almost 500 candidates accused of Baathist ties until after the March 7 election.
The Shi'ite-led government's heated reaction and calls for a campaign against Baathists could lead to a dangerously explosive witchhunt that might reopen sectarian wounds between once dominant Sunnis and the Shi'ite majority just as violence fades.
Fear of a Baathist revival might benefit Prime Minister Nuri al-Maliki and other Shi'ite Islamist leaders, as it could win back voters who might otherwise back cross-confessional, secular alliances, like former prime minister Ayad Allawi's.
"We should not stand here with our hands tied during this sensitive period. We should take revenge for our martyrs, prisoners, the displaced and the homeless left by the former regime," Baghdad provincial governor Salah Abdul-Razzaq, a senior member of Maliki's Dawa party, told protesters.
"We will not allow the mass graves to return," he said, adding that the Baath party "and its instruments al Qaeda" were behind recent bomb attacks that have killed dozens of Iraqis in Baghdad and in the Shi'ite holy city of Kerbala.
"We will de-Baathify the Baghdad administration."
Local government leaders in Basra affiliated with Dawa and the other main Shi'ite blocs, the Supreme Islamic Iraqi Council (ISCI) and anti-American cleric Moqtada al-Sadr's movement, made similar vows at a rally to purge the city of Baath sympathisers.
The ban on the candidates imposed by a body dominated by Shi'ite politicians with ties to Iran is dominating the ballot, viewed as a critical juncture as U.S. troops prepare to withdraw and Iraq signs multibillion-dollar deals with oil firms.
The vote could lead to a more a stable, if still fragile, democracy or possibly lurch Iraq back into sectarian conflict and chaos. The furore has already led to a delay in the start of election campaigning to Feb. 12 from Feb 7, although that did not stop Sunday's rallies from looking like a campaign events. Shi'ites along with Iraq's minority Kurds were brutally suppressed and often slaughtered by Sunni dictator Saddam.
Sunnis largely boycotted the last national elections in 2005 and resentment at their loss of power helped fuel a ferocious insurgency. U.S. officials fear that Sunnis may take up arms again if they feel they are being disenfranchised this time.
The focus on Baathists benefits the ruling Shi'ite parties as it distracts attention from corruption, still creaky public services like power, and security breaches that have allowed several major suicide bomb attacks in recent months. Maliki has staked much of his re-election hopes on being credited for a sharp fall in violence over the past two years.
The spotlight on the Baath party also brings Iraq's Shi'ite factions back together after Maliki had decided to run on his own against a coalition led by his former partners, ISCI.
That serves Iran's purposes, which would like to see a friendly Shi'ite-dominated government emerge in a neighbour with which it fought an 8-year war in the 1980s. (Additional reporting by Suadad al-Salhy and Aseel Kami in Baghdad and Aref Mohammed in Basra; Writing by Michael Christie; Editing by Jack Kimball)
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