* State-sponsored rallies in main cities
* Assad expected to make speech on reforms
* Government resignation seen as cosmetic change
* Fears of sectarian violence
(Adds State Department spokesman)
DAMASCUS, March 29 (Reuters) - President Bashar al-Assad sought to deflect the greatest challenge to his 11-year rule by mobilising tens of thousands of Syrians in mass rallies across the country on Tuesday in response to pro-democracy protests.
Assad also accepted the resignation of his government, ahead of a long-awaited speech in which he is expected to lift emergency law which has been in place for nearly half a century since his Baath Party took power in a coup.
Abolishing emergency rule has been a key demand of protests, which erupted nearly two weeks ago and in which more than 60 people have been killed, drawing international condemnation.
But the government-organised show of mass support suggested Assad was seeking to address his people from a position of strength, adopting a strategy to counter unrest that was once unthinkable in this most tightly controlled of Arab states.
Protesters at first had limited their demands to greater freedoms. But, increasingly incensed by a security crackdown on them, especially in the southern city of Deraa where protests first erupted, they later demanded the "downfall of the regime".
The calls echo those heard during recent Arab uprisings that have toppled autocratic presidents in Tunisia and Egypt and also motivated rebels fighting Libyan leader Muammar Gaddafi.
U.S. Secretary of State Hillary Clinton condemned what she called "the Syrian government's brutal repression of demonstrators, in particular the violence and killing of civilians in the hands of security forces" in recent protests.
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State television showed people in the Syrian capital Damascus and cities including Aleppo, Hama, Homs and Tartus waving the national flag and pictures of Assad and chanting "God, Syria, Bashar" in what were dubbed "Loyalty Marches".
"Breaking News: the conspiracy has failed!" declared one banner, referring to government accusations that foreign elements and armed gangs are behind the unrest. "With our blood and our souls we protect our national unity," another said.
Employees and members of unions controlled by Assad's Baath Party, in power since 1963, said they had been ordered to attend the rallies, where there was heavy presence of security police.
All gatherings and demonstrations not sponsored by the state are banned in Syria, a country of 22 million at the sensitive heart of generations of Middle East conflict.
Media organisations operate in Syria under restrictions. The government has expelled three Reuters journalists in recent days -- its senior foreign correspondent in Damascus and then a two-man television crew who were detained for two days before being deported back to their home base in neighbouring Lebanon.
"BLOODTHIRSTY SECTARIAN DEMONS"
"President Assad accepts the government's resignation," the state news agency SANA said, adding that Naji al-Otari, the prime minister since 2003, would remain caretaker until a new government was formed. Lebanese television said Assad was expected to make a speech in parliament on Wednesday.
Sacking the government is seen as a cosmetic change since it has little authority in Syria, where power is concentrated in the hands of Assad, his family and the security apparatus.
Earlier more than 200 protesters gathered in Deraa chanting "God, Syria, and Freedom" and "O Hauran rise up in revolt", a reference to the plateau where Deraa is located.
Deraa is a centre of tribes belonging to Syria's Sunni Muslim majority, many of whom resent the power and wealth amassed by the elite of the Alawite minority to which Assad belongs. Latakia, a religiously mixed port city, has also seen clashes, raising fears the unrest could take on sectarian tones.
The government has said Syria is the target of a project to sow sectarian strife.
"If things go south in Syria, bloodthirsty sectarian demons risk being unleashed and the entire region could be consumed in an orgy of violence," wrote Patrick Seale, author of a book on late president Hafez al-Assad, Bashar's father, on the Foreign Policy blog.
Bordered by Iraq, Jordan, Turkey, Lebanon and Israel, Syria maintains a strong anti-Israeli position through its alliances with Shi'ite Muslim regional heavyweight Iran and Lebanon's Hezbollah, as well as Palestinian Islamist militant group Hamas. It has also reasserted influence in smaller neighbour Lebanon.
WEST'S HANDS TIED
Last week Assad made a pledge to look into ending emergency laws, consider drafting laws on greater political and media freedom, and raise living standards.
However Syrian officials, civic rights activists and diplomats doubt that Assad, who contained a Kurdish uprising in the north in 2004, would completely abolish emergency laws without replacing them with similar legislation.
Emergency laws have been used since 1963 to stifle political opposition, justify arbitrary arrest and give free rein to a pervasive security apparatus.
French Foreign Minister Alain Juppe urged Syria to adopt political reform, but said it was not time for sanctions or intervention by the United Nations.
"We believe President Assad is at a crossroads," the U.S. State Department's spokesman Mark Toner said on Tuesday. "He has claimed to be a reformer for over a decade but he has made no substantive progress on political reforms and we urge him to ... address the needs and the aspirations of the Syrian people."
Protesters want political prisoners freed, and to know the fate of tens of thousands who disappeared in the 1980s.
The British-educated president was welcomed as a "reformer" when he replaced his father in 2000. He allowed a short-lived "Damascus Spring" in which he tolerated debates that criticised Syria's autocratic rule, but later cracked down on critics.
Assad's crackdown on protests has drawn international condemnation, including from close ally, neighbouring Turkey. But, Syria is unlikely to face the kind of foreign military intervention seen in Libya.
By cultivating a rapprochement with the West in recent years, while at the same time consolidating its ties with anti-Israeli allies Iran, Hezbollah and Hamas, Syria poses a headache for the West which has few options beyond condemning the violence and making calls for political reforms.
The United States, long critical of Syria's support for anti-Israeli militant groups and its involvement in Lebanon, restored full diplomatic relations by sending an ambassador to Damascus in January after a nearly six-year gap.
"Iran is very involved with this regime. Iran would defend it with all means possible," said Antoine Basbous, head of the Paris-based Observatory of Arab countries.
"What's at stake if the Syrian regime falls is not just a matter of Syria internally, the stakes are above all geopolitical ones on a regional scale." (Additional reporting by Khaled Yacoub Oweis in Amman and Catherine Bremer and John Irish in Paris; writing by Yara Bayoumy and Dominic Evans)
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