* Protests break out around country
* Government says subsidy cuts needed to ease budget woes
* Prime Minister says Arab spring cost Jordan financially
By Suleiman Al-Khalidi
AMMAN, Nov 14 (Reuters) - Protests erupted in Jordan's capital Amman and provincial towns after the government cut fuel subsidies in a move to secure a $2-billion IMF loan but which sent fuel prices soaring.
More than 1,000 people spilled into the streets in the capital Amman late on Tuesday and smaller protests erupted in several provincial towns after Islamist and tribal opposition groups said they would demonstrate.
Hundreds of protesters chanted against King Abdullah and the powerful intelligence forces in slogans that personally target the monarch and were unheard of before the wave of Arab Spring-inspired protests hit the kingdom early last year.
"Freedom, freedom, down with Abdullah," young men chanted at the main Dakhiliyah square in the heart of Amman as angry crowds denounced the widely expected price hikes.
Authorities bolstered security across the country that is a crossroads in the Middle East, bordering Saudi Arabia, Iraq, Syria, the West Bank and Israel.
Street protests against autocracy, corruption and mismanagement of funds have led to the overthrow of several long-serving Arab leaders, including those of Tunisia, Egypt, Libya and Yemen.
But unlike pro-democracy Arab Spring-inspired demonstrations in neighbouring countries that have turned violent, Jordan has not recorded a single death in nearly two years of peaceful protests.
Elsewhere in the country, scattered protests went off peacefully but a petrol station was burnt by angry youths in the country's second largest northern city of Irbid.
The move announced by the cabinet and which takes effect after midnight is the first major rise in petrol prices since street protests early last year, inspired by the wave of Arab unrest, pushed Jordanian authorities to expand social spending and freeze major fuel price hikes.
The price rises range from more than 50 percent for bottled gas used for cooking, 33 percent for diesel and kerosene for transport and heating and 14 percent on lower grade petrol.
The government, mindful of public fury that exploded into street clashes in the depressed south of the country after price hikes in 1989 and 1996, had been reluctant to raise fuel prices.
Prime Minister Abdullah Ensour warned the mainstream Islamist opposition, the Muslim Brotherhood, the country's largest political party, against exploiting the price rises to agitate. He also said that the price hikes were unavoidable.
"If the move was delayed we would have faced a catastrophe and insolvency," he said in an interview with state television.
Most of the tribal and Islamist opposition has demanded faster reforms but does not seek the toppling of King Abdullah.
He is seen as an arbiter among competing tribes and a unifying force in a population divided between native Jordanians and a majority of citizens of Palestinian origin.
The budget deficit is forecast to rise to $3.5 billion this year, Ensour added, without saying how much would be saved by cutting the subsidies. Jordan had been spending $2.3 billion annually on subsidies, almost a quarter of its annual budget.
"The fiscal situation of the kingdom had been heavily impacted by the Arab Spring," Ensour said.
The bombing of a pipeline bringing Egyptian gas has forced Jordan to switch to costlier fuels for power generation and Saudi Arabia declined this year to repeat its payment of a $1.4 billion cash injection to stop the economy heading to the brink of collapse.
Jordan hopes the subsidy cuts will show its commitment to fiscal consolidation and win support from the International Monetary Fund, Western and Arab aid, and help it to tap capital markets in a Eurobond issue.
Economists have said Jordan's ability to maintain a costly subsidy system and a bloated state bureaucracy, whose salaries consume the bulk of state expenditure, was increasingly untenable in the absence of large foreign capital inflows or infusions of foreign aid.
The government has been forced to rely heavily on domestic borrowing from banks. Public debt has increased 19 percent since last year to $22 billion and is now 72 percent of GDP. Foreign reserves also fell sharply by 34 percent to $6.85 billion since the end of last year.
Ensour said direct cash transfers will be disbursed to Jordan's poorest households within a week to mitigate the price impact. He also promised that energy prices would be adjusted lower if oil prices fell below $100 a barrel.