* Dismissed graft prosecutor accuses police of obstruction
* His boss says he was removed from case for mishandling it
* Erdogan ally is new minister in charge of domestic security
* Scandal shakes stocks; lira hits all-time low against dollar (Adds prosecutors' council statement)
By Ece Toksabay and Humeyra Pamuk
ISTANBUL, Dec 26 (Reuters) - A Turkish prosecutor accused police on Thursday of obstructing his pursuit of a high-level graft case, adding to public scrutiny of Prime Minister Tayyip Erdogan's government as it hunkered down defiantly.
Three ministers had resigned after their sons were among dozens of people detained on Dec. 17 as part of the probe into corrupt procurement practices, which has exposed Turkey's deep institutional divisions and left the pugnacious premier facing arguably the biggest crisis of his 11 years in power.
Erdogan responded by replacing half his cabinet with loyalists on Wednesday while investors took fright, and the lira currency fell further on Thursday to an all-time low.
The new interior minister, Efkan Ala, will be in charge of Turkey's domestic security and is considered especially close to Erdogan, who called the secretive investigation a foreign-orchestrated plot without legal merit and responded by sacking or reassigning some 70 of the police officers involved.
In allegations disseminated to Turkish media in writing, prosecutor Muammer Akkas said he had also been removed from the case, which he described as compromised by police who had refused to comply with his orders to arrest more suspects.
"By means of the police force, the judiciary was subjected to open pressure, and the execution of court orders was obstructed," Akkas said.
"A crime has been committed throughout the chain of command ... Suspects have been allowed to take precautions, flee and tamper with the evidence."
The statement did not name any of those accused.
The government and police did not immediately respond.
Turkish chief prosecutor Turhan Colakkadi said Akkas had been removed from the case for leaking information to the media and failing to give his superiors timely updates on progress.
Such regulations, tightened at the weekend on government orders, incense Turks who see an authoritarian streak in Erdogan and took to the streets in mass-protests in mid-2013.
"Erdogan has a deep state, (his) AK Party has a deep state and Efkan Ala is one of the elements of that deep state," said Kemal Kilicdaroglu, head of the biggest opposition party CHP, using a term which in Turkey denotes a shadowy power structure unencumbered by democratic checks and balances.
SEPARATION OF POWERS
The High Council of Judges and Prosecutors, a Turkish body which handles court appointments independent of the government, added its weight to the criticism.
The latest requirement that police investigators keep their superiors informed amount to "a clear breach of the principle of the separation of powers, and of the Constitution," the council said in a statement.
During his three terms in office, the Islamist-rooted Erdogan has transformed Turkey, cutting back its once-dominant secularist military and overseeing rapid economic expansion.
But his response to the scandal has drawn a European Union call to safeguard the independence of the Turkish judiciary.
It has also rattled markets. The lira plumbed a record low of 2.1282 against the dollar at 1540 GMT on Thursday while stocks fell and government bond yields rose.
"The dismissal of half an entire cabinet is worrying enough. The corruption probe is escalating by the day, causing a further deterioration in market sentiment towards Turkey," said Nicholas Spiro, head of Spiro Sovereign Strategy.
At an Interior Ministry handover ceremony earlier on Thursday, Ala said Turkey might have been targeted by neighbours jealous of its successes.
"When these developments are sustainable, attacks from various centres on the political stability of the country is not unexpected," he said, without elaborating.
For Erdogan, the scandal is potent and personal.
It lays bare his rivalry with Fethullah Gulen, a U.S.-based Turkish cleric whose Hizmet (Service) movement claims at least a million faithful including senior police officers and judges.
One of the three cabinet members who quit on Wednesday, Environment Minister Erdogan Bayraktar, broke ranks by urging the premier to resign too. The Turkish leader, facing local elections in March and a national ballot in 2015, was unmoved.
Vowing no tolerance for corruption, Erdogan said on Wednesday the graft case had been tainted by foreign interests.
"It would not be incorrect to say that, with this (Ala) appointment, Erdogan has personally taken the reins of domestic affairs," Sedat Ergin, a columnist with the mass-circulation newspaper Hurriyet, told CNN Turk television.
Unlike the rest of the 20-member cabinet, Ala is not a lawmaker and thus does not answer directly to a constituency.
In his previous post as undersecretary of the prime ministry, political sources told Reuters, he urged a crackdown on the unprecedented summer demonstrations the swept major Turkish cities. Six protestors and a policeman were killed.
"Who would you trust other than your undersecretary, with whom you have been working closely for years?" said one government source, who characterised the new ministers as "surprise" picks in line with Erdogan's desire for fresh faces. (Additional reporting by Orhan Coskun, Gulsen Solaker and Seda Sezer; Writing by Dan Williams; Editing by Andrew Roche, John Stonestreet and David Evans)