Tunisia's powerful union urges political, economic reform to head off crisis

* UGTT union has more than 1 million members

* Played role in restoring calm after 2011 revolution

* New protests erupt over inequality, economy

* COVID-19 curbs have hit economy hard

By Tarek Amara and Angus McDowall

TUNIS, Jan 25 (Reuters) - The leader of Tunisia's UGTT labour union, widely seen as the country's most powerful political player with more than 1 million members, told Reuters urgent reform was needed to head off a social and economic crisis.

"We need a national discussion on the political system ... the dialogue should include reforms to revive the economy," said Noureddine Taboubi, secretary general of the union, a national movement that helped end colonial rule in 1956 and won a Nobel Peace Prize for its role calming tensions after the 2011 "Arab Spring" revolution.

As the revolution's 10th anniversary arrived amid COVID-19 restrictions that barred public gatherings and worsened the economy, youth in poor areas this month clashed with police at night while protesters marched during the day against inequality and police brutality.

Some protesters chanted "the people want the fall of the regime" - a chant popularised during the uprising a decade ago.

Critics of the UGTT say its opposition to many cuts in state spending or efforts to reform publicly owned companies through privatisation have contributed to Tunisia's fiscal ills - a deficit of 11.5% of GDP last year and public debt of 90% of GDP.

Since the revolution, successive coalition governments have tinkered with the economy with little success, entrenching joblessness and inequality and aggravating a decline in state services.

Taboubi last month pushed President Kais Saied, a political independent, to agree to a national dialogue like the one that helped calm a period of polarisation between Islamist and secularist movements in 2013.

Saied publicly agreed with the idea, but has not set a date for the dialogue or divulged details of how it might work.

'POWER TO INFLUENCE'

Taboubi said the union would not remain silent "if politicians continue to argue and the economy continues to worsen". He did not say how it might act beyond: "We have a power to influence".

He wants changes to the electoral law that he said prevents parties from building workable governing coalitions.

The 2019 election returned a fragmented parliament in which no party held more than a quarter of seats and has resulted in two coalitions, both fragile.

On Friday, the International Monetary Fund called for reforms backed by Tunisian society and foreign lenders to control the state wage bill and reform state-owned companies - major employers of UGTT members.

Taboubi rejected criticism that the union stands in the way of economic reforms needed to restore sustainable public finances, but called on the IMF to have patience with Tunisia as it struggles to deal with the crisis.

"We are open to all reforms. These allegations are ridiculous," Taboubi said, adding the union was open to reducing staff levels in some state companies such as Tunis Air.

Tunisia is in a new IMF financing program to help fund its fiscal deficit.

"The IMF and international lenders must understand the peculiarity of the fragile social situation in a country suffering accumulating problems for decades," he said. (Editing by Janet Lawrence)