(Refiles to correct date in dateline)
* Tunisia’s 2011 revolution raised hopes of better life
* But many materially poorer due to inflation, austerity
* Price, tax hikes, alleged graft spark new wave of unrest
* Jobless graduates protesting in cradle of 2011 uprising
* Run-down city of Sidi Bouzid typical of economic woes
By Ulf Laessing
SIDI BOUZID, Tunisia, Jan 12 (Reuters) - Shouting slogans and holding up placards outside a government office in the impoverished Tunisian city of Sidi Bouzid, university graduates have a message for officials - give us jobs or you will face trouble.
They are part of the spasm of anti-government unrest that spread nationwide this week, stoking another political crisis in a nation in turmoil as austerity bites hard under pressure from foreign lenders to get Tunisia’s finances in order.
It was in Sidi Bouzid that mass protests erupted seven years ago and rapidly engulfed the rest of the North African country, sweeping away autocrat Zine El-Abidine Ben Ali in the first of the Arab Spring uprisings.
Now the young men and women who spearheaded the outbreak of unrest in Sidi Bouzid are back in the streets of the dusty, dilapidated provincial city, complaining that they never reaped the benefits promised by the 2011 revolution.
Tunisia is the only democratic success story of the 2011 uprisings, with a unity government comprising secular centrists, moderate Islamists and independents, but - materially - most people are worse off than before.
Several deadly Islamist militant attacks have scared off much of the foreign tourism and investment critical to the economy, knocking the currency down 60 percent since 2011 and driving up inflation to a three-and-half-year high.
“We had hoped that our lives would become better, that we get jobs and housing, but everything has turned for the worse,” said Bashir Hussein, one of the disgruntled graduates.
He is embarrassed that at 32 he still lives at home, unable to find a good job since graduation a decade ago - a fate shared by many in a country where unemployment among the young runs around 30 percent. “I cannot afford to marry. I don’t have hopes anymore that things will improve,” Hussein said.
He and his friends had hoped the 2011 revolution would translate into new jobs in public services, which Ben Ali had steadily expanded to buy loyalty - Tunisia’s spend on public wages is around 15 percent of GDP, one of the highest levels worldwide.
But that model has crumbled as a fall in phosphate exports due to blockages by protesters demanding jobs, as well as the decline in tourism revenue, have forced Tunisia to take on loans from the International Monetary Fund and Western countries.
Creditors want the government to stop spending almost two-thirds of the budget on public salaries and focus on education and infrastructure to create jobs over the long term.
The Sidi Bouzid protesters say authorities pledged to hire some 60 graduates from the town back in 2015 in what analysts say is a common gesture to discourage dissent. But the jobs have never transpired due to austerity-driven hiring freezes.
“We had a promise but officials have backtracked,” Hussein said. “We will keep protesting.”
The government has bowed to pressure from labour unions not to lay off civil servants, leaving no room for new hires.
To help fulfil foreign creditors’ demands to lower the deficit, the Tunis government from Jan. 1 hiked taxes and prices affecting many common items from petrol to mobile phone calls, hitting the unemployed hardest.
While protests have been smaller than in 2011, investors and Western diplomats are concerned they could still pressure the government into watering down reforms, as before, to secure social peace.
Stoking such worries, the Islamist Ennahda party, part of the governing unity coalition, has endorsed calls from labour unions to roll back some of the reforms including subsidy cuts.
“I suspect they will have to give in (at least partially) on the wage demands and postpone the hikes in prices,” said Charlie Robertson, global chief economist at Renaissance Capital.
Sidi Bouzid is located just 200 km (125 miles) inland from coastal Tunis but it takes four hours to reach the city of 300,000 people by car as there is no highway or railway service.
This forces motorists to rely on slow, pothole-ridden roads winding through village after village.
“We’ve demanded many times a link to the highway or railway so investors can come but we are told there is no money,” said Attia Athmouni, an activist who was one of the first to call for protests in Sidi Bouzid after a young street vendor immolated himself when bribe-seeking police confiscated his fruit cart.
“The money is there. It is just not distributed to the people because we still have corruption,” he said, pointing to crumbling housing as evidence of what he called graft siphoning off funds needed to invest in infrastructure.
Government officials deny such accusations and say Prime Minister Youssef Chahed has made it a priority to fight graft.
Eight officials have been jailed so far but parliament passed an amnesty last year for old, Ben Ali regime figures accused of graft, which upset many ordinary people.
With a public hiring freeze in place, some find work as farmhands but many youth spend the day idle in cafes.
Many families used to get by on the earnings of male relatives working in neighbouring oil-rich Libya until dictator Muammar Gaddafi was toppled in a rebellion that was inspired by Tunisia’s uprising but dragged the country into chronic chaos.
Most Tunisians have left Libya but with annual inflation for meat and other food items rising by more than 10 percent, some have returned despite the dangers posed by factional violence.
“I just came from Libya and will probably go back in two weeks,” said 24-year old Mahran Alaoui, sitting with an employed friend in a Sidi Bouzid cafe. Alaoui said he works in a shop in on a coastal road in the western Libyan city of Zawiya notorious for shootouts between armed factions.
“There are risks in Libya but in Tunisia I can’t find a job, and prices are very high,” he said.
Athmouni, the protest activist, said thousands of youth had left Sidi Bouzid since 2011 seeking work abroad, often as illegal migrants going by boat to Europe, or joining Islamic State militants in Libya, Iraq or Syria.
“If you are desperate, people do anything,” he said. (Editing by Mark Heinrich)