UPDATE 1-Turkey's Erdogan vows to "choke" financial speculators
* Erdogan accuses speculators of harming economy
* Prime minister wants low interest rates and high growth
* Investors braced for another turbulent week
By Jonathon Burch
ANKARA, June 9 (Reuters) - Turkish Prime Minister Tayyip Erdogan vowed on Sunday to "choke" financial market speculators who he said were growing rich off "the sweat of the people", and urged Turks to put their money in state not private banks.
Speaking at a series of rallies in the capital Ankara after a week of the fiercest anti-government demonstrations in years, Erdogan blamed a "high-interest-rate lobby" for causing volatility in financial markets and vowed to stop them.
"The lobby has exploited the sweat of my people for years. You will not from now on," Erdogan said to cheers from crowds of flag-waving supporters at Ankara airport.
"Those who attempt to sink the bourse, you will collapse. Tayyip Erdogan is not the one with money on the bourse ... If we catch your speculation, we will choke you. No matter who you are, we will choke you," he said.
Erdogan repeatedly said last year he wanted real interest rates of zero percent, saying high rates amounted to modern-day theft and lashing out at what he called an "interest rate lobby" of investors who at that time wanted higher rates.
Bent on high economic growth, especially ahead of an election cycle beginning next year, he accuses speculative investors in the capital markets - both domestic and foreign - of stoking volatility by seeking quick profit at the expense of Turkey's longer-term economic health.
"I am saying the same thing to one bank, three banks, all banks that make up this lobby. You have started this fight against us, you will pay the high price for it," he said, without indicating what action might be taken.
At a subsequent rally in Ankara, he urged people to use state banks, and rounded on some of Turkey's largest companies that he also sees as part of the lobby, including the Koc , Dogus and Sabanci conglomerates.
"You should put the high-interest-rate lobby in their place. We should teach them a lesson. The state has banks as well, you can use state banks," he said.
FOREIGN INVESTORS RATTLED
Turkey's financial markets were turbulent last week, as protests raged in cities around the country, and investors are preparing for more volatility this week as the uncertainty continues.
Early on Friday, the lira hit its weakest against its euro/dollar basket since October 2011, while Istanbul's main share index lost around 15 percent over the week. The yield of Turkey's two-year benchmark sovereign bond hit a 6-month high on Thursday.
Erdogan's AK Party has taken Turkey from being a crisis-prone economy to Europe's fastest-growing over the past decade, and has won three successive elections, each time with a higher share of the vote.
It is a success story applauded by international investors, including the debt ratings agencies Moody's and Fitch, which have both raised Turkey to "investment grade".
But the unprecedented protests against Erdogan's government have exposed faultlines between a religiously conservative heartland fiercely supportive of him and a secular middle class, including some wealthy businesspeople and bankers, who fear creeping authoritarianism.
"The attack on stock market speculation will hardly go down well with foreign portfolio investors who have bought into the Erdogan/AKP story over the past decade, and have been part of its success," said Timothy Ash, head of emerging markets research at Standard Bank.
"It is strange that they are somehow trying to pin the blame for the protests on markets, and market participants, including foreigners."
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