Story highlights The Turkish lira is dropping against the dollar

The crisis intensified this week

Protesters chant "Help, there are thieves"

Police in the Turkish city of Istanbul are dispersing crowds demonstrating against government corruption amid a growing political scandal in the nation.

Police fired plastic bullets with white powder that makes people cough and used water cannon to disperse small groups of demonstrators trying to reach the city's Taksim Square.

A high-level corruption investigation involving the government of Prime Minister Recep Tayyip Erdogan sparked the anger against the government and caused the currency to drop against the dollar.

The crisis intensified this week as three ministers stood down and one, Urbanization and Environment Minister Erdogan Bayraktar, called on the country's leader to follow suit.

The ministers resigned Wednesday after their sons were detained in a roundup that included the head of a public bank, several bureaucrats and high-profile businessmen.

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The detentions came after a two-year investigation by the Istanbul Prosecutor's Office into allegations of corruption, including money laundering, gold smuggling and bribery.

Protesters chanted "government resign," and "Help, there are thieves," and threw rocks and fireworks at the police, and erected barricades. Police warned demonstrators over loudspeakers to disperse. When they didn't, they ordered plainclothes police to begin detaining people.

A heavy police presence on Taksim Square kept demonstrators from reaching that major city center.

Istanbul's Gezi Park, the site of anti-government protests last spring, is completely cordoned off by riot police. Anti-government demonstrators protested plans to build a shopping mall at that site, and populist outrage at the government took hold.

Erdogan on Friday again made reference to the demonstrations: "Gezi was a plot, they weren't successful, they are trying this (corruption probe) now, but they will not succeed."

While Erdogan may face a challenge from the streets, the far greater threat to his authority may come from an erosion of support within his own camp. There were more resignations from his party Friday, including the former minister of culture, Ertugrul Gunay -- the third deputy to go this week.

Prime minister lashes out

Erdogan was at the Istanbul airport making a speech to his supporters denying the corruption allegations and accusing foreign plotters and actors of trying to undermine his government.

Earlier Friday, the Prime Minister lashed out at his own judiciary, accusing an Istanbul prosecutor of behaving like a buffoon. Erdogan is determined to discredit a corruption inquiry that continues to undermine the legitimacy of his government.

Public prosecutors have publicly complained that they are unable to conduct a second wave of arrests in a wide ranging probe that includes bribery and the rigging of government tenders.

Their hands have been tied by a directive which demands they seek approval from their superiors before interrogating suspect.

That directive was declared invalid by the High Council of Judges and Prosecutors, the body which supervises the running of the courts. For the time being, the directive remains in effect.

Prosecutor says he can't carry out an investigation

Turkish newspapers have reprinted a facsimile of a court order demanding that the Prime Minister's son report for questioning by January 2. Protesters chanted that police should arrest the son, Bilal, who is a businessman.

Muammer Akkas, an Istanbul prosecutor complained Thursday that he had been removed from the case after police had refused to carry out orders to arraign suspects. He accused them of an obstruction of justice.

"All my colleagues and the public should be aware that I, as a public prosecutor, have been prevented from carrying out an investigation," he said in a written statement he distributed in front of a courthouse.

Erdogan mocked that action in a speech Friday to a university audience. "Are you a prosecutor or a flier distributor? You go out in front of the court house and distribute fliers?"

The courts have succeeded, according to the pro-government newspaper Haberturk, in enforcing an injunction that freezes the assets of seven businessmen behind Istanbul's construction boom, including the winner of the tender to construct a new airport for Istanbul.

This will have an effect on the country's large construction industry, according to Atilla Yesiada, Turkish adviser for GlobalSource Partners. "We really don't know if allegations ... of shady tenders are true or not, but as long as they remain in the air, banks and companies will find it very hard to renew their loans or to get new credit from external investors," he said.

The military wants to stay out of the fray

Erdogan has, throughout his political career, faced the opposition of the Turkish military and is widely regarded to have finally averted that threat after a series of trials in which senior officers were sentenced for plotting the overthrow of his government.

A statement Friday posted on the website of the Armed Forces re-confirmed the top brass' intention to steer clear of the current controversy. "The Turkish armed forces does not want to, in anyway, be a part of political discussions," it said.

Market confidence shaken

Erdogan's most difficult battle may be to regain market confidence. The crisis has slammed economic confidence in Turkey, sending the nation's currency to a record low and stocks plunging.

The lira hit an all-time low against the dollar Friday. The key index for stocks on Turkey's main exchange, the Borsa Istanbul National 100, has slumped 6.2% this week and is down more than 18% this year.

Erdogan reshuffled his cabinet, but the moves failed to restore investor confidence in the Turkish economy.

Turkey is expected to hold local elections in 2014 and many analysts see those elections as a test of Erdogan's grip on power after a turbulent year of unprecedented anti-government protests.