* EU leaders tell Erdogan of concerns over crackdown
* Erdogan has purged police after graft probe
* Spat risks slowing new momentum in EU talks
By Adrian Croft and Orhan Coskun
BRUSSELS, Jan 21 (Reuters) - Turkish Prime Minister Tayyip Erdogan, making his first visit to Brussels in five years, faced sharp criticism from European Union leaders on Tuesday over a crackdown on the judiciary and police that has rattled investors.
Erdogan has purged hundreds of police and moved to impose tighter control on the courts in response to a corruption inquiry that has rocked his centre-right AK Party, which has Islamist roots and has been in power for more than a decade.
The crackdown has soured ties with the EU just at a time when Turkey's long-stalled bid to join the 28-nation bloc had appeared to be regaining some momentum. Even as Erdogan met officials in Brussels, his government launched another wave of dismissals of judges and prosecutors.
EU leaders said they had told Erdogan of their concerns.
"It is important not to backtrack on achievements and to ensure that the judiciary is able to function without discrimination or preference," European Council President Herman Van Rompuy told reporters.
European Commission President Jose Manuel Barroso told Erdogan at a joint news conference that respect for rule of law and independence of the judiciary were basic principles of democracy and essential conditions for EU membership.
"Whatever the problems are, we believe that the solution for those problems should respect the principles of rule of law and separation of powers," Barroso said.
Erdogan, a feisty leader who often responds forcefully to criticism, scolded EU leaders for raising the dispute in public, but generally struck a subdued note, perhaps mindful of the jitters in financial markets about Turkey's political woes.
The lira currency hit a new record low against the dollar on Tuesday after the central bank left interest rates unchanged.
"Instead of communicating this (criticism) through the media, we should handle this in our bilateral talks through our relevant ministers," Erdogan said at the news conference.
Erdogan has cast the huge graft inquiry, which has led to the resignation of three ministers and detention of businessmen close to the government, as an attempt by a U.S.-based cleric with influence in the police and judiciary to unseat him.
An AK Party draft bill, which would give government greater control over the appointment of judges and prosecutors, has raised particular alarm in Brussels, though Erdogan signalled on Tuesday it was being revised to accommodate EU concerns.
Turkey's decades-old drive to join the EU gained traction late last year when Ankara and Brussels opened talks on a new policy area of the membership negotiations. But the EU concerns about the crackdown risk halting that momentum.
A panel headed by the justice minister said in a statement on its website late on Tuesday that the government had removed 96 more judges and prosecutors from their posts on Tuesday.
They included a judge who heard the "Sledgehammer case" in which top retired military officers were convicted for leading an alleged plot to overthrow Erdogan's government a decade ago.
Despite his criticism of the crackdown, Barroso said he believed Turkey would swiftly address the EU's concerns.
Erdogan, who remains popular in Turkey where he has presided over a decade of strong economic growth, said judges operated within a democracy and this meant limits on their power.
"If we consider the judiciary as a separate power, then this would lead to a country of judicial rule and not democracy," he told the news conference.
Erdogan said the EU membership talks were on the right track for now, though he repeated a threat he has made before that Turkey might "end up turning in other directions" if the negotiations did not achieve results. He did not elaborate.
Ankara began negotiations to join the EU in 2005, 18 years after applying. But a series of political obstacles, notably over the divided island of Cyprus, and resistance to Turkish membership in Germany and France, have slowed progress. (Additional reporting by Justyna Pawlak in Brussels and Ece Toksabay and Nick Tattersall in Ankara; Editing by Gareth Jones)