LARBAA, Algeria, September 29, 2009 (Reuters) - Algerian President Abdelaziz Bouteflika's success in reining in Islamist violence has brought with it a challenge: people are now demanding their government deliver more jobs and higher wages. The energy exporting country on Tuesday marked 10 years since Bouteflika introduced a national reconciliation policy that played a central role in curbing the violence, though al Qaeda-linked insurgents still mount sporadic attacks. But as Algerians grow used to better security they have started looking to the government to use its energy revenues to do more on bread-and-butter issues which received little attention during nearly two decades of civil strife. Mohamed Chougrane, a 65-year-old who owns a small restaurant in the town of Larbaa, about 50 km (30 miles) east of Algiers, said at the conflict's height in the 1990s mutilated corpses were thrown on the town's streets every day. "Peace is back now, but we want jobs, houses for our young, and we also want better services," said Chougrane, pointing to the mud covering the road after a few minutes of rain.

Discontent over the government's perceived shortcomings is evident from frequent riots, labour strikes and the thousands of Algerians who risk their lives each year to smuggle themselves into Europe by crossing the Mediterranean Sea. This social unrest, analysts say, could replace insurgent violence as the biggest threat to stability in Algeria, the world's fourth largest exporter of gas and its eighth biggest oil exporter. Algeria's government is dominated by a generation that fought in Algeria's war of independence from France in the 1950s and 1960s and later cemented its power fighting the Islamists. Now, voices are starting to emerge from within Algeria's political elite calling for new blood. Farouk Ksentini, a lawyer who heads a state-sponsored human rights commission and who is close to Bouteflika, made a rare acknowledgement that the political system needed renewal now that the violence had eased. "I think that the emergence of a new political class is positive and necessary," he told Reuters.

Algeria plunged into a civil conflict after its military-backed government scrapped legislative elections in 1992 which an Islamic party was poised to win. The government feared an Iranian-style revolution. About 200,000 people died in the conflict, according to estimates from international non-governmental organisations. The violence diminished sharply after Bouteflika offered an amnesty to rebels who renounced violence - helped by a crackdown by increasingly well-equipped security forces. As the killings subsided, the government used the income from oil and gas exports to launch development plans worth billions of dollars to re-build roads, hospitals and schools and ease a chronic housing shortage.

But millions of Algerians are still without adequate housing, unions say public sector wages have not kept pace with inflation and unemployment among the urban young is nearly 30 percent, according to the International Monetary Fund. Lower global oil prices, if they persist, could curtail spending. Energy revenues are expected to shrink to $40-$45 billion this year, according to Energy Minister Chakib Khelil, down from $76 billion in 2008. Abdelwahab Djakoun, analyst and editor of La Nouvelle Republique, a daily close to the government, said expectations of what Algeria's leaders can do have to be realistic. "Does Algeria have the financial means to make each citizen happy? I don't think so," he said.

But that does little to soothe the leaders of independent trade unions, representing some teachers, healthcare workers and civil servants. They are planning a wave of strikes, starting next week, to demand wage rises. "The social situation is tense. We have no alternative but to pursue the fight as long as (our members') purchasing power is weak," Meziane Meriane, head of the independent union for secondary schools, told Reuters. The fundamental problem, said political analyst and university lecturer Mohamed Lagab, is that Algeria's ruling elite is rooted in a fight against Islamist rebels that is now largely in the past. "We need a radical change. The government brought peace but showed that it is unable to bring prosperity," he said.