ISTANBUL (Reuters) - Turkey’s political and military leaders meet on Thursday as a storm gathers over a coup plot investigation against the armed forces which is threatening stability and investor confidence in the EU-candidate country.

Tension between the ruling AK Party, which has roots in political Islam, and the secular armed forces risks rising yet further during the day when prosecutors question former commanders of the air force and navy, and may charge them.

Prime Minister Tayyip Erdogan and President Abdullah Gul are due to meet armed forces chief General Ilker Basbug at 11 am (0900 GMT) but room for compromise to prevent the crisis from spinning out of control is limited.

Twelve officers, some of them admirals, have already been charged with plotting in 2003 to overthrow the government which hardline secularists believe harbors a hidden Islamist agenda.

Commanders of the military, whose role as guardian of Turkey’s secular system has been eroded by European Union-backed reforms, have already warned of a “serious situation” after an emergency meeting to discuss the investigation.

The former air force and navy chiefs being questioned on Thursday are merely the most high profile among 50 detained officers.

“The room for a compromise in the short-term is closing,” said Eurasia Group analyst Wolfango Piccoli. “The most immediate risk is that the military may react stridently in public against the arrests, which could deepen the already tense tussle with the government.”

Adding to the concerns, Chief Prosecutor Abdurrahman Yalcinkaya said on Wednesday he was looking into statements made by two AK deputies. But he has not reached the stage of opening a formal investigation against the party.

If he does so, it could prompt a call for snap elections by the AK Party, which narrowly survived a bid by Yalcinkaya to have it banned for anti-secular activities in 2008. Parliamentary elections are due in 2011.

The growing crisis has already taken its toll on Turkey’s financial markets. Turkish stocks closed down 3.4 percent and the lira hit a seven-month low on Wednesday.

The AK Party, first elected in 2002 in a landslide victory over established parties blighted by corruption and accusations of misrule, is also embroiled in a dispute with the judiciary -- another pillar of the orthodox establishment.

The military has ousted four governments since 1960, but has said the days of coups are now over.