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* About 500 people participate
* Say change needed to end political deadlock
By Ulf Laessing
KUWAIT, June 3 (Reuters) - Around 500 Kuwaitis staged an anti-government protest on Friday, demanding the resignation of the prime minister and an end to a political crisis hampering legislation in the major OPEC oil producer.
"The people want the overthrow of the head (of government)," the crowd chanted, echoing slogans of protesters in Cairo's Tahrir Square that led to the ouster of Egyptian President Hosni Mubarak.
Thanks to a generous welfare system, Kuwait has avoided the mass protests by thousands of people that have forced out governments in Egypt and Tunisia.
But the Gulf Arab state has endured a long political stalemate and opposition has built up against Prime Minister Sheikh Nasser al-Mohammad al-Sabah, an influential member of the ruling family.
Last month, two lawmakers moved to question Sheikh Nasser over alleged misuse of public funds, a charge he denies. The request came days after he had unveiled his seventh cabinet.
The previous cabinet quit in March to avoid parliamentary questioning of three ministers.
At a protest in front of parliament, speakers accused Sheikh Nasser of corruption and inefficiency and attacked him for his refusal to be questioned in parliament, which is something the ruling al-Sabah family has sought to avoid.
"The people are the only source of legislation...The young people are capable of overthrowing the head (of government)," activist Mohammad al-Hamlan told the cheering crowd.
"Nasser, step down for the sake of Kuwait," a poster said.
Several opposition and pro-democracy groups had called for the protest which came a day after a much smaller pro-government rally on the same square in the centre of Kuwait City.
Kuwait, which sits on a tenth of global crude reserves, allows more political freedom than Gulf neighbours such as Saudi Arabia where few dare criticise the government or members of the ruling family.
But tensions in Kuwait's parliament, which must approve all major bills and the budget, have delayed legislation aimed at attracting investment to diversify the economy away from oil.
Reporting by Ulf Laessing; Editing by Michael Roddy