* Shops, banks closed and flights cancelled
* Country braces for more street violence
* Brahmi's killing is second such assassination (Adds protests, killing detail, stock market, Merkel statement)
By Tarek Amara
TUNIS, July 26 (Reuters) - Thousands of protesters massed in the Tunisian capital on Friday, a day after the assassination of an opposition politician, while shops and banks closed their doors and all flights in and out of the country were cancelled.
Mohamed Brahmi was shot dead on Thursday in the second such political killing this year, which prompted violent protests against the Islamist-led government in the capital and other cities and a strike call by the main trade union body, the UGTT.
Protesters assembled outside the UGTT headquarters in central Tunis, preparing to march down the capital's main boulevard as riot police deployed.
In a reference to the country's Islamist-led government, the demonstrators chanted: "Down with the rule of the Muslim Brotherhood."
The protest followed calls by the secular opposition for street rallies to topple the government led by the Islamist Ennahda Party. Islamists called for a demonstration after Friday prayers.
Brahmi belonged to the secular, Arab nationalist Popular Front party, whose then-leader, Chokri Belaid, was shot dead on February 6. Belaid's killing set off the worst violence in Tunisia since President Zine al-Abidine Ben Ali fell in 2011 in the first of the Arab Spring revolutions.
Brahmi, 58, was a critic of the Ennahda-led ruling coalition and a member of the Constituent Assembly that has drafted a new constitution for the North African nation of 11 million.
Authorities said Brahmi had been shot 14 times.
German Chancellor Angela Merkel condemned what she called the "cowardly assassination" of Brahmi and demanded that his and Belaid's killers be swiftly brought to justice.
Shops and banks were shuttered in anticipation of violence on Friday. All flights were cancelled because of a strike called by the main labour organisation, the civil aviation office said.
The Tunis stock exchange fell by 1.9 percent on Friday morning.
Divisions between Islamists and their secular opponents have deepened since the popular uprising against Ben Ali, which unleashed unrest across the Arab world, unseating rulers in Egypt, Libya and Yemen, and leading to civil war in Syria.
Brahmi's family said his funeral would take place on Saturday and he would be buried near the tomb of Belaid.
Tunisian President Moncef Marzouki asked the army to organise a state funeral for Brahmi, the presidency said.
Secularist called for the dissolution of the government and the formation of a national salvation administration, which was rejected by Prime Minister Ali Larayedh.
In Tunis late on Thursday, riot police fired tear gas in front of the interior ministry to disperse protesters, a Reuters witness said.
Similar demonstrations erupted in the cities of Sfax and Kef and in the southern town of Sidi Bouzid, the cradle of the Tunisian revolution, where protesters set fire to two Ennahda party offices.
Tunisia announced a day of national mourning on Friday and radio stations broadcast patriotic songs.
Tunisia's political transition since the revolt that toppled Ben Ali has been relatively peaceful, with the moderate Islamist Ennahda party sharing power with smaller secular parties.
But the government has struggled to revive the economy and has come under fire from secularists who accuse it of failing to curb the activities of Salafi Islamists.
The Egyptian army's overthrow of Islamist President Mohamed Mursi on July 3 following mass protests against him has further energised the anti-Islamist opposition in Tunisia.
Rached Ghannouchi, the Ennahda party leader, said the attack on Brahmi was aimed at "halting Tunisia's democratic process and killing the only successful model in the region, especially after the violence in Egypt, Syria and Libya".
"Tunisia will not follow the Egyptian scenario," he told Reuters. "We will hold on."
The assassination occurred on Tunisia's Republic Day as the country prepares to vote in the next few weeks on the new constitution before a presidential election later in the year.
The turmoil dealt another blow to efforts to revive Tunisia's vital tourism industry. Cultural events, including the Carthage Festival, were suspended following Brahmi's killing. (Additional reporting by Fatma Matoussi; Editing by Giles Elgood)