By Daniel Flynn and Anthony Boadle
SAO PAULO/BRASILIA (Reuters) - A top judge in Brazil ruled on Friday that Luiz Inacio Lula da Silva should be stripped of a ministerial role so he can be investigated for graft, minutes after the ex-president rallied tens of thousands of supporters behind embattled President Dilma Rousseff.
In a move likely to inflame tensions between the judiciary and Brazil's leftist government, Supreme Court justice Gilmar Mendes said Rousseff's decision to name Lula her chief of staff appeared designed to shelter him from prosecutors' charges of money laundering.
Lula's appointment on Wednesday, which sparked protests in several cities, means only the Supreme Court can investigate him, placing him beyond the reach of a crusading judge heading Brazil's biggest ever graft probe into corruption at state oil company Petrobras.
"It would be plausible to conclude that the appointment and subsequent swearing-in could constitute fraud of the Constitution," Mendes said in his ruling. His decision to suspend Lula from ministerial office can be appealed before a plenary session of the court.
The opposition branded Rousseff's appointment of her charismatic political mentor as a desperate bid to shore up support in her Workers Party against impeachment proceedings, which picked up speed in Congress on Friday, as well as a means of protecting him from prosecutors.
At a rally in Sao Paulo's central Paulista Avenue, tens of thousands of Workers' Party supporters cheered Lula as he promised that his return to government would bring a greater emphasis on returning the recession-striken economy to growth and creating jobs.
"We have a long time before 2018 to turn around the fortunes of this country," Lula said, referring to the next presidential elections, for which he has suggested he could be a candidate. "There will not be a coup."
Pollster Datafolha estimated some 95,000 people took part in the Sao Paulo demonstration. Tens of thousands more participated in pro-government protests in Rio de Janeiro, while police said more than 5,000 joined a rally in the capital Brasilia in front of Congress.
Hours earlier, riot police had fired water cannon and tear gas to disperse anti-government protesters who had blocked the same central Sao Paulo thoroughfare since Wednesday, when demonstrations erupted against Lula's appointment as minister.
CLOCKING TICKING ON IMPEACHMENT
In the lower house of Congress, opposition parties hurried along impeachment proceedings against Rousseff by holding a session on Friday, when lawmakers are usually away from the capital.
The president has 10 sessions in the lower house to present her defense and the decision to hold a session on Friday meant the clock has started on those, even though the special impeachment committee did not meet.
The case against her centers on allegations that Rousseff broke budget rules to boost spending as she campaigned for re-election in 2014.
Lula and Rousseff both deny any wrongdoing.
Antonio Imbassahy, the leader of the opposition Social Democratic Party of Brazil (PSDB) in the lower house, said the committee could present its findings by mid-April.
Committee chairman Rogerio Rosso, of the Social Democratic Party (PSD) that forms part of Rousseff's coalition, said the committee was balanced between lawmakers for and against unseating the president, but recent political events would influence their decisions.
On Sunday, more than 1 million people poured into the streets of several cities to demand Rousseff's departure, the biggest in a wave of protests calling for her resignation.
"The large street demonstrations are echoing here," he told local television. "Political instability is growing."
Rousseff's main coalition party, the fractious Brazilian Democratic Movement Party (PMDB), has brought forward to March 29 a meeting of its executive to decide whether to break with her government and seek her impeachment.
The PMDB's leader, Vice President Michel Temer, would become Brazil's acting president if the lower house votes to impeach Rousseff and the Senate agrees to start a trial. Many party insiders expect it to back impeachment.
"The PMDB's hurry is based on the will of the people," a party leader, Wellington Moreira Franco, said on Twitter. "On Tuesday the 29th, the party will decide to break away."
The party is considering expelling Mauro Lopes, a PMDB lawmaker who became Rousseff's civil aviation minister on Thursday, despite a party ban on taking up new posts in her administration.
Rousseff appointed Lula, who remains one of Brazil's most influential politicians six years after leaving office, in an attempt to fight impeachment and win back working-class supporters amid the worst economic recession in decades.
But his appointment has been overshadowed by taped telephone conversations between Rousseff and Lula that were released by a crusading anti-corruption judge who said they showed the pair discussing how to interfere with his Petrobras probe.
The release of the recordings has inflamed tensions that were already running high between the judiciary and government.
"This was illegal," Rousseff told a rally on Friday. "Only the Supreme Court has the authority to wiretap a president."
(Additional reporting by Guillermo Parra-Bernal, Brad Haynes, Eduardo Simoes and Tatiana Bautzer in Sao Paulo, Maria Carolinea Marcello in Brasilia, and Pedro Fonseca in Rio de Janeiro; Editing by Frances Kerry, Bernard Orr)