By Richard Balmforth
KIEV, Feb 4 (Reuters) - Ukraine's President Viktor Yanukovich, battling mass unrest against his rule, faced demands from the opposition on Tuesday for a constitutional change that would seriously curtail his powers.
Yanukovich was still weighing whom he might name as his new prime minister to calm the crisis on the streets - though rumours swirled that he could be considering a hardline ally who at the moment heads his administration.
As the Ukrainian central bank intervened again to stop panic demand for dollars weakening the hryvnia currency, Ukraine sharply criticised EU heavyweight Germany after comments by its foreign minister that sanctions should be used as a threat unless a political solution was found soon to end the crisis.
At least six people have been killed in the past two weeks in unprecedented politically-linked violence in Kiev, whose centre is now a heavily-barricaded fortified protest zone.
Fierce clashes between riot police and squads of radical protesters have prompted global concern that the ex-Soviet republic, a substantial buffer territory of 46 million people between Russia and the EU, might plunge into civil war.
Though there has been no violence in Kiev for several days, Western governments have warned Yanukovich that it risks flaring up again unless he can find a compromise with the opposition.
Yanukovich triggered the uprising on the streets last November when he walked away from a trade deal with the European Union in favour of closer economic ties with Russia.
Though his move was rewarded with a $15-billion offer of credits and cheap gas from Moscow for Ukraine's ailing economy, it provoked outrage among millions of Ukrainians who dream of a European future for their country.
Caught in a geopolitical tug-of-war between Russia and the West, Yanukovich faces tough choices over his future alliances.
The United States and its EU allies are backing the protesters, though largely with words rather than deeds or cash. Russian President Vladimir Putin's hefty economic lifeline comes with a condition that he forms a government that suits Moscow.
Ukraine quickly reacted after German Foreign Minister Frank-Walter Steinmeier raised the issue of sanctions.
The foreign ministry called in Berlin's ambassador to Kiev and said later in a statement: "It was emphasised that there was a need for an objective assessment of the development of the internal political processes of the situation in our state and that provocative statements should be avoided."
Yanukovich, according to reported comments by a political ally, has said he will not use force to clear the streets, where hundreds of protesters are camped out on Independence Square or in occupied municipal buildings.
The opposition, buoyed by Western expressions of support, pressed on Tuesday in parliament for a return to a previous constitution which would mean Yanukovich losing some of the key powers he has accumulated since being elected in 2010.
These include appointing the prime minister and entire government as well as regional governors.
The opposition also wants an unconditional amnesty for protesters detained in the unrest to be broadened into an unconditional pardon for all those being held by police.
"One of the ways out is the redistribution of powers held by the authorities. After that we can be more certain of changes in the country," said boxer-turned-politician Vitaly Klitschko, one of the main opposition leaders.
GOING TO SOCHI OLYMPICS
"We have to make swift changes and return to the 2004 constitution in order to even out the powers of the president," said far-right nationalist leader Oleh Tyahnibok.
Analysts say any return to the 2004 constitution - something which the pro-Yanukovich majority in parliament seems unlikely to allow - would automatically mean an early presidential election, another key demand of the opposition.
A leading lawmaker from Yanukovich's Party of the Regions was quoted in local media late on Monday as saying the president had told his allies he would not declare a state of emergency or use troops or other force to clear central Kiev's protest zone.
"We have the capacity to free administrative premises and even the Maidan (main square) by force," Yanukovich was quoted as saying by lawmaker Yuri Miroshnichenko. "I will never do that because these are also our citizens."
It is unclear what options Yanukovich now has. His office said he was preparing to go to Sochi in Russia to attend the opening of the Winter Olympics later this week - a visit which could provide a chance for further talks with Putin.
Russia has released $3 billion of the promised $15 billion lifeline, but Putin has since hinted there may be no more coming until Moscow sees the colour of the next Ukrainian government.
The sub-text seems to be that Moscow will keep the credits from coming on stream if Yanukovich brings in a government that will tilt policy back towards the West.
Yanukovich has yet to appoint a successor to Russian-born hardliner Mykola Azarov, who stepped down as premier on Jan. 28.
But several news websites picked up a comment by an opposition figure that he believed Yanukovich would pick Andriy Klyuev, at present his head of administration, for the hot spot.
But Klyuev, a former first deputy prime minister and former head of the National Defence and Security Council, is seen by most protesters as being behind a police crackdown at the end of November and his appointment could prove risky.
EU foreign policy chief Catherine Ashton was due to hold talks on Wednesday with Yanukovich and with opposition leaders.
Other EU officials have played down comments by Ashton that Europe and the United States are working to offer funds to help Ukraine enact reforms.
However, the U.S. State Department said Washington and the EU were in preliminary discussions on financial help for Ukraine if a new technocrat government is formed. A senior State Department official is due in Kiev this week.. (Additional reporting by Natalia Zinets; Writing by Alastair Macdonald and Richard Balmforth; Editing by Gareth Jones)