Government plans to expand Kurdish freedoms, announced in August, suffered a a blow Friday as the constitutional court outlawed the Democratic Society Party (DTP) for links with Kurdish rebels who have led a bloody 25-year insurgency in the southeast.

The ruling "totally torpedoed the democratic opening", said Ahmet Insel, political scientist at the Galatasaray University.

Tensions had already built up before the ruling, with Prime Minister Recep Tayyip Erdogan under cross-fire for pledging broader rights to the Kurds in the hope of curbing separatist sentiment and ending the conflict.

The opposition has slammed the government for jeopardising national unity, while Kurdish activists have played down the reform pledges as inadequate.

The main opposition Republican People's Party hailed the court's verdict as a "just decision", while government members were skeptical, with Energy Minister Taner Yildiz saying DTP's closure "resolves nothing".

The DTP was outlawed for links with the Kurdistan Workers' Party (PKK), which took up arms in 1984, sparking a conflict that has claimed some 45,000 lives and earning itself the label of a terrorist group from Ankara and much of the international community.

The court also stripped DTP co-chair Ahmet Turk and another lawmaker from their parliamentary seats and banned them, along with 35 other party members, from politics for five years.

The 19 DTP deputies who remain in the 550-member legislature said they would boycott parliament and consider resigning from their seats altogether.

It remains to be seen whether and how the government will proceed with its "democratic opening" for the Kurds, which was already faltering under the strain of mounting violence.

The planned reforms are related mainly to the language rights of the Kurdish community, estimated to number about 12 million people in Turkey's 71-million population.

In an unprecedented gesture, the authorities also set free eight PKK militants who quit their rare bases in neighbouring Iraq and surrendered to border officials in October in a symbolic show of support for reconciliation.

But the move turned counter-productive as the militants were given a hero's welcome in the southeast and Ankara came under fire for giving a lenient treatment to "terrorists".

In an equally surprising setback for the government, violent protests erupted over the prison conditions of jailed PKK leader Abdullah Ocalan after he was moved to a new cell enabling him to socialise with other inmates.

The transfer aimed to address European criticism that solitary confinement violated Ocalan's human rights, but Kurdish activists claimed the new cell's physical conditions were worse.

One student was killed in the protests last week, and the PKK responded by shooting seven soldiers in an ambush in Resadiye, northern Turkey, on Monday.

"The PKK is imposing a fiat on the government: 'either you negotiate directly with me or get ready for civil strife'," Cengiz Candar wrote in the Radikal daily.

"Turkish democracy has been wounded in cross fire -- from the PKK in Resadiye and the constitutional court in Ankara," he said.

The ambush was followed by military operations which killed nine PKK rebels.

The surge of violence, unseen in Turkey for months, stoked fears of ethnic tensions, and at least one person was injured from a gunshot in Turkish-Kurdish street clashes in Istanbul Sunday.

Alarmed over the escalation, President Abdullah Gul has suggested a meeting of all political parties to discuss reconciliation efforts. The opposition is yet to respond to the idea.