UPDATE 2-Tunisia averts national strike with public sector wage deal

Tunisia's biggest union on Thursday cancelled a nationwide strike scheduled for later this month after the government agreed to raise wages of about 670,000 state employee, ending months of tensions. The government is under pressure from foreign lenders to cut spending and reduce its large budget deficit but also faces public anger over high unemployment and poverty.

"The deal is a victory for Tunisia, it will help create a good social climate," Nourredine Taboubi, head of the General Union of Tunisian Workers (UGTT), told reporters after a ceremony to sign the salary deal. The total wage rise was not announced.

Tunisia's economy has been in crisis since autocrat Zine al-Abidine Ben Ali was toppled in 2011, with unemployment and inflation shooting up. "The government has bought social peace," Minister of Economic Reform Taoufik Rajhi said before the ceremony.

Teachers had been boycotting exams for hundreds of thousands of students for nearly two months. On Wednesday, thousands rallied near the prime minister's office for better conditions and wages. Last month, rail, bus and air traffic was halted and protests drew thousands as the UGTT staged a one-day strike.

Political turmoil and lack of reforms have deterred investment sorely needed to create jobs, forcing the government to implement austerity measures in return for loans totalling about $2.8 billion from the International Monetary Fund (IMF). The IMF had wanted Tunisia to freeze public-sector wages - the bill for which doubled to about 16 billion dinars ($5.5 billion) in 2018 from 7.6 billion in 2010 - to reduce them from about 15.5 percent of GDP now to 12.5 percent in 2020. (Reporting By Tarek Amara; Editing by Andrew Cawthorne)