ISTANBUL (Reuters) - Galatasaray have terminated coach Fatih Terim's contract after he declined to accept a proposed two-year extension to his term, the Istanbul club said on Tuesday.

In a statement on its website, Galatasaray said "recent developments" had started to damage the club's "values", without elaborating. Turkish media have been reporting growing discord between Terim and the club's management.

"First and foremost, our board of directors are responsible for protecting these values and passing these on to future generations," the club said in the statement.

"As part of this responsibility, in order to prevent further deterioration of our community, our board of directors decided unanimously to notify Mr. Terim that his contract has been terminated," it said.

Terim, 60, agreed last month to take charge of Turkey's national team, a post he has held on two previous occasions, for their remaining 2014 World Cup qualifiers, in conjunction with his Galatasaray job.

Galatasaray, who are currently in tenth place in the Turkish League, suffered a humiliating 6-1 defeat at home by Real Madrid in their Champions League Group B opener last week.

On Sunday, Galatasaray's Istanbul derby against Besiktas was halted in the 93rd minute when hundreds of fans stormed the pitch after Galatasaray midfielder Felipe Melo was shown a red card.

Galatasaray were leading 2-1 in the third minute of added time when the match was halted, sending the players sprinting for the safety of the locker rooms.

(Writing by Jonathon Burch; editing by Martyn Herman and Justin Palmer)

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