* PM says opposition, Islamic cleric form 'alliance of evil'
* Anonymous recordings on YouTube purportedly expose graft
* Turkey holds municipal elections on March 30
By Ralph Boulton
ISTANBUL, March 23 (Reuters) - With a huge rally on the approach to the Bosphorus waterway, Turkish Prime Minister Tayyip Erdogan will launch a final electoral push on Sunday to stifle rivals he described this weekend as an 'alliance of evil' in cahoots with terrorism.
Erdogan, who vowed last week to wipe out Twitter in Turkey for carrying anonymous postings accusing him and associates of corrupt dealings, accused the networking site of "systematic character assassination". The site remained blocked on Saturday in Turkey, access denied as a "protection measure".
Leading condemnation from Western governments and rights groups, the White House said the Twitter ban ahead of March 30 local elections undermined democracy and free speech. Criticism reflected growing concern over events in a NATO country held up in the past as a template for a stable Muslim democracy.
The setting for Sunday's rally on reclaimed land beside the Sea of Marmara matches the drama of Turkish politics since police graft raids in December triggered a vitriolic power struggle between Erdogan and Islamic cleric Fethullah Gulen, who had helped him secure his hold on power over the last decade.
In a whirlwind of rallies across Turkey, Erdogan has railed against "the individual from Pennsylvania" - Gulen lives in self-imposed exile in the United States - accusing his Hizmet network of posting manipulated telephone taps on Twitter and concocting criminal investigations to implicate his government and family in graft. Gulen denies such accusations.
"This is a terrorist organisation," Erdogan said in reference to Hizmet, which has a network of supporters in the police and judiciary that the prime minister describes as an anti-democratic 'parallel state'. "It is our duty to take the necessary measures against this organisation."
He accused rival parties - the main secularist opposition CHP, the nationalist MHP and the Kurdish BDP - of conspiring against him for the coming elections which, although only local, are the first real test of his popularity since anti-government riots last summer and the current corruption scandal.
"This is an alliance of evil. Ankara will break this alliance on March 30. Ankara, will you break this alliance of the CHP, MHP, BDP and Pennsylvania?" he asked to loud cheers of "yes" from tens of thousands in the crowd.
Ankara is the Republican People's Party's (CHP) best hope of achieving a significant victory over Erdogan's Islamist-rooted AK Party. CHP is also targeting Istanbul, whose loss would be a huge blow for Erdogan.
Police and officials of the AK Party, in power since 2002, say they expect more than a million people to attend the Istanbul rally beginning at 1300 GMT.
Next Sunday's vote could yet decide the future of a man who at first won plaudits in the West and Middle East for his economic success and reforming drive, but has more recently come under heavy criticism as, in the eyes of many, an authoritarian, increasingly intolerant leader.
Not that all would share that view or be swayed by the accusations of corruption against him and his party. Erdogan remains by far the most popular politician and hopes to match or exceed the 40 percent vote AK received at local polls in 2009.
But he faces an almost daily, anonymous release on YouTube of audio tapes of tapped conversations suggesting involvement in corrupt actions. Erdogan excoriates the anonymous forces posting them for violating secret state communications and says the tapes were edited and engineered to give false impressions.
"Twitter has been used as a means to carry out systematic character assassinations by circulating illegally acquired recordings, fake and fabricated records of wiretapping," a statement from the prime minister's office said.
A senior Turkish government official told Reuters that talks with Twitter on resolving problems which led to the blocking of the social media network were going positively.
The Turkish government is seeking the power to take down, and quickly, postings it considers libellous and injurious to the democratic process.
There is widespread expectation that further postings will come, intended to damage Erdogan, who denies all accusations of graft. These could be released ahead of the local polls, where any result significantly below 40 percent could undermine his position and his prospects of election to a powerful presidency later this year.
But they could also emerge during the presidential election period itself. There is no open sign of any move against Erdogan in the AK Party but a poor result next week could revive concern that emerged over his hard line against protesters last summer.
Ultimately, much could hinge on the opposition regaining the leadership and momentum it has lacked since 2002. Then, Erdogan drew on public anger over corruption in Turkey's old political elite, naming his new party AK, an acronym for Justice and Development but also a word meaning clean or white.
Erdogan retains the popular touch, though his rhetoric is increasingly now aimed at AK's core conservative, religious supporters, rather than the more secularist urban population.
"We believe in Erdogan, that he is true. We can't believe these other people and these tapes, that's why he was right to block Twitter," 33-year-old Serpel Tuncer said, straining to be heard over booming campaign music at a rally in Ankara.
(Additional reporting by Daren Butler and Humeyra Pamuk in Istanbul, Jonny Hogg in Ankara; Editing by Gareth Jones)
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