Two Turkish Ministers Quit After Sons Held In Widening Corruption Scandal

ANKARA (Reuters) - Two Turkish ministers resigned on Wednesday after their sons were arrested in a corruption investigation that has pitted the government against the judiciary and rattled foreign investors.

Interior Minister Muammer Guler and Economy Minister Zafer Caglayan each had a son among 24 people arrested on graft charges on December 17 in a case involving the chief of state-run lender Halkbank. Neither minister has been implicated and both say their sons are innocent.

Prime Minister Tayyip Erdogan has responded to the investigation by purging police officers involved, including the chief of the force in Istanbul, Halkbank's headquarters.

The Erdogan government portrays the scandal as a foreign-orchestrated effort to sow discord in Turkey. The country has flourished economically during the Islamist-rooted premier's three terms, though he has been accused of authoritarianism.

"I have resigned from my post of economy minister to help the truth to come out and to foil this ugly plot, which has impacted my child and my close work colleagues among others," Caglayan said in a statement.

In a separate statement, Guler called the affair "a dirty set-up against our government, party and country".

With international trading on hold for Christmas, the resignations were unlikely to have a strong market impact inTurkey. The lira had plunged to an all-time low of 2.0983 against the dollar on Friday but rallied to 2.0801 on Tuesday.

Among many Turks, the affair has reignited anti-Erdogan sentiment that had simmered since the mid-2013 mass protests against his rule. It also drew an EU warning that Ankara needed to safeguard the separation of powers.

Political analysts see some sapping of popular support for Erdogan's AK Party but no immediate threat to the government. The scandal could, however, hurt AK's standing in local elections due in March. The next national ballot is in 2015.

Moving to salve the domestic divisions, President Abdullah Gul pledged on Tuesday that there would be no cover-up and that the investigation would be adjudicated in independent courts.

(Writing by Dan Williams; Additional reporting by Ece Toksabay; Editing by Pravin Char)