June 5 (Bloomberg) -- Turkey's Constitutional Court struck down a law to ease curbs on the Islamic-style headscarf, a blow to Prime Minister Recep Tayyip Erdogan before a decision by the judges on whether to ban his party for promoting religion.

The court said that the legislation ``contravened the principles of secularism,'' said a statement handed to reporters in the capital Ankara today. The judges voted 9 to 2, a court spokesman said, amending a previously reported count of 7 to 4.

The ruling may increase the chance that the Constitutional Court will also bar Erdogan and his Justice and Development Party from politics for mixing Islam with the affairs of state. That trial has raised concern about political instability in mostly Muslim Turkey, sending stocks and the lira lower.

``The case for the Justice party's closure certainly becomes stronger now,'' said Wolfango Piccoli, an analyst at Eurasia Group in London, in a telephone interview. ``It doesn't look good at all for the party.''

The Turkish lira fell 1.3 percent against the dollar to 1.2459 from 1.2298 earlier. The decision came after stock trading closed for the day.

The move by Erdogan's party to ease the curbs on the headscarf forms the centerpiece of a prosecutor's case at the Constitutional Court to ban the party, and exclude 71 of its leaders from politics for five years.

The Court today exceeded its powers, Bekir Bozdag, deputy chief of the Justice party's group in parliament, told the NTV news channel in a televised interview.

Ruling Next Month

The judges may make a final ruling in the closure case as early as next month. Justice presented its written defense to the court's 11 judges in April and lawmakers are due to present final defense documents later this month.

Staunch secularists in Turkey, led by the Republicans, see the protection of restrictions on religious freedoms as key to shielding Turkey from Islamist forces bent on making Turkey more like Iran. The government says it respects the secular code of Turkey's founder Mustafa Kemal Ataturk.

Turkish legislators voted to lift the headscarf restrictions on Feb. 9 by 411 votes to 103, after an opposition party voted with the government. President Abdullah Gul, a political ally of Erdogan, approved the step two weeks later.

Erdogan says he won a mandate to ease curbs on religion after his party gained 47 percent of the vote in a general election last year, the biggest plurality for any party since 1965. Two predecessors of Justice were outlawed in the late 1990's on similar charges of breaking Turkey's secular code.

Ataturk, a former army general, banished religious rules and symbols from public life after he founded modern Turkey in 1923. The courts and the military have pledged to protect his vision of a Western-oriented country.

Justice's defense in the closure case is made all the more difficult because eight of the 11 judges on the Constitutional Court were appointed by former President Ahmet Necdet Sezer, a staunch defender of Turkey's secular traditions.

To contact the report for this story: Mark Bentley in Ankara at mbentley3@bloomberg.net.

Last Updated: June 5, 2008 11:37 EDT