Kyrgyz opposition rallies in restive southern city

* Osh rally draws 10,000-15,000 opposition supporters

* Opposition leaders challenge government authority in south

* Seven parties vie for council seats in Sunday vote

OSH, Kyrgyzstan, March 1 (Reuters) - Opponents of Kyrgyzstan's new president staged a rally on Thursday in a show of strength designed to ward off government attempts to exert control over the restive south of the impoverished Central Asian republic.

The peaceful rally in Osh, scene of bloody ethnic clashes in June 2010, was organised three days before a local council election that could threaten the opposition-backed mayor of Kyrgyzstan's second largest city.

Authorities in the more Russified north of the mainly Muslim country exert little control over the poorer and more nationalist south, homeland of Kurmanbek Bakiyev, the president who was deposed in an April 2010 revolution.

Current President Almazbek Atambayev's Social-Democractic Party of Kyrgyzstan will be among seven parties vying on Sunday for seats on the local council that appoints the mayor of Osh.

Prominent southern politicians, including two candidates defeated by Atambayev in the October presidential election, say they want the incumbent, Melis Myrzakmatov, to remain in office.

Clashes between ethnic Kyrgyz and Uzbeks killed nearly 500 people in and around Osh in June 2010, and the issue of nationalism still pervades a society split roughly between the two ethnicities.

Political divisions have long threatened stability in Kyrgyzstan, a former Soviet republic that hosts U.S. and Russian military air bases and lies along a major heroin trafficking route out of Afghanistan.

Speakers at the rally in Osh showed little patience with the coalition government in the capital, Bishkek. Many called for it to stand down less than three months after its appointment.

"The socio-political and economic situation in the country has deteriorated sharply," Adakhan Madumarov, who finished second in the presidential election, said to loud applause, whistles and shouts.

"I came here to support the opposition and to support Myrzakmatov," said 60-year-old pensioner Abdimitalip, an ethnic Kyrgyz. "The authorities haven't justified the people's trust."

Police estimated the turnout at 10,000, while the organisers said 15,000 people were present.

Zakirzhan, a 50-year-old ethnic Uzbek entrepreneur, said the government should be given more time to implement reforms.

"We don't need these meetings," he said, declining to give his second name. "It's whipping up excitement among the people again. We haven't yet come to our senses after 2010."

UNITED OPPOSITION

Madumarov has agreed to join forces with Kamchybek Tashiyev to unite the southern Kyrgyz electorate. The split nationalist vote weakened both candidates in the presidential election, in which Tashiyev finished third.

Tashiyev's Ata Zhurt party is alone among the five parties represented in parliament in refusing to join the coalition government. Madumarov's Butun Kyrgyzstan party narrowly missed out on gaining seats in parliament.

Other rally organisers included Communist Party head Iskhak Masaliyev and Akhmatbek Keldibekov, the former parliamentary speaker who resigned in December after being accused of corruption and links to organised crime.

Masaliyev told a news briefing after the rally that the opposition had set a deadline of March 15 for the government to resign. "If the government does not resign, meetings and protest actions will take place," he said.

Presidential adviser Farid Niyazov said by telephone that the new government had not had enough time to implement reforms.

"We need an opposition, and it's right that they demand the authorities perform," he said. "But the government needs to be given time to work." (Additional reporting by Olga Dzyubenko in Bishkek; Writing by Robin Paxton; editing by Robert Woodward)