Georgia's new PM promises big spending ahead of poll

* Former interior minister approved as government head

* Big pensions increase, other spending promised

* New PM and policy drive ahead of October elections

By Margarita Antidze

TBILISI, July 4 (Reuters) - New Georgian Prime Minister Vano Merabishvili promised big social stimulus measures on Wednesday, including a sharp hike in pensions, with an eye on parliamentary elections in October when the government will battle a rising new opposition party.

President Mikheil Saakashvili named Merabishvili prime minister last week, asking him to tackle Georgia's 16 percent unemployment and implement agriculture and healthcare reforms.

Addressing the parliament at his approval hearing, Merabishvili promised to focus job creation, spending more on social benefits for the poor, increasing pensions and providing a better access to health insurance.

"We plan to spend 20 billion lari (${esc.dollar}12 billion) from the budget in the next four years on implementation of all tasks presented in our new programme," Merabishvili said.

Under the policy programme called "More benefit to people", pensions are expected to rise to ${esc.dollar}100 from the current ${esc.dollar}65 from 2013, at a cost of 6 billion lari.

The policies also include 3 billion lari on health insurance, 4 billion lari on agriculture, 4 billion lari on education and 3 billion lari on social benefits. Merabishvili promised to attract ${esc.dollar}4 billion in foreign investment and create more than 270,000 new jobs in the next four years.

Georgia's economy was crippled by a five-day war with Russia in August 2008 and the global crisis that followed shortly after, crimping foreign investment and forcing the former Soviet Union country to rely on international aid.

Saakashvili's ruling United National Movement faces a growing competition from a newly-created opposition group, led by a billionaire Bidzina Ivanishvili.

Opinion polls show Ivanishvili's Georgian Dream coalition lagging behind, although it has gathered large numbers to rallies in the Caucasus state of 4.5 million people.

"This move (Merabishvili's appointment) is aimed at further strengthening of the ruling party's position ahead of and after the election, which this party is hoping to win," Alexander Rondeli, the head of the Georgian Foundation for Strategic and International Studies (GFSIS) think-tank, told Reuters.

"Saakashvili promoted one of his best managers, who is also popular," Rondeli said.

Former defence minister Bacho Akhalaia replaced Merabishvili as a interior minister. Former Education Minister Dmitry Shashkin took the defence portfolio, becoming the first defence minister in Georgia's history who is Russian by nationality.

Merabishvili, 44, became one of the most powerful figures after the bloodless 2003 Rose Revolution that brought Saakashvili to power.

As interior minister since December 2004, he presided over police reforms and a crackdown on corruption, winning praise from some international institutions and observers.

Critics, however, accuse him of brutal repression of opposition rallies in 2007 and 2010.

Like the president, he is considered pro-Western and hostile towards Moscow. (Reporting by Margarita Antidze; Editing by Robin Pomeroy)