* 2012 spending to grow in line with forecast GDP growth
* Budget focuses record spending on education amid unrest (Updates with Pinera, Finance Minister quotes, details)
By Antonio de la Jara and Simon Gardner
SANTIAGO, Sept 29 (Reuters) - Chilean President Sebastian Pinera on Thursday unveiled a record 2012 budget bill that hikes public spending by 5 percent to over ${esc.dollar}60 billion and bolsters education, as he deals with deep social unrest over his policies.
Pinera is under pressure to boost spending as he grapples with mounting protests spearheaded by students demanding better, free education and as Chileans demand more benefits and a bigger share of a copper boom windfall in the world's top producer.
Pinera said the budget bill, which will be sent to Congress on Friday, earmarks ${esc.dollar}11.65 billion for education spending -- up 7.2 percent from 2011 levels -- and includes the creation of a previously announced ${esc.dollar}4 billion education fund.
He said it was the biggest annual education budget in Chile's history.
Total spending in 2012 will grow in line with estimated gross domestic product growth next year, Pinera said.
"This bill prioritizes ... education, health, employment, support for the elderly, small- and mid-sized companies, rural areas, the regions, the fight against poverty, crime and drug-trafficking," Pinera said in televised national address.
"In recent months, the whole country has shown a firm compromise for a deep and urgent reform to our education system," he added, calling the budget a great leap forward for education. "I call for unity now more than ever in a world that faces uncertainties and economic crises." <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ > For a TAKE A LOOK on Chile's economy: [ID:nN26HILEFI] > Teen shot in Chile anti-Pinera protest dies [ID:nN1E77P040] > Americas indicators graphic: http://r.reuters.com/nem92s ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
After the speech was aired, students banged pots and pans near the presidential palace in downtown Santiago in a 'cacerolazo' -- a popular form of protest in Latin America. Hours earlier, thousands of students took to the city's streets in the latest in a raft of protests, with isolated clashes with police.
Just before Pinera's address was televised, student leaders said talks with the government earlier on Thursday had fallen short of expectations, and vowed to push on with demonstrations.
"We hope the students will be happy with the budget," Finance Minister Felipe Larrain said. "We're hoping to count on their good will and cooperation. Beyond legitimate differences, we are doing something for the country."
While Latin America's model economy is seen expanding around 6.5 percent this year and is an investor magnet thanks to prudent fiscal and monetary policies, many ordinary Chileans feel they are not sharing in the economic miracle.
The unrest, which results in regular pitched battles between rock-throwing protesters and police armed with batons and tear gas canisters, has been a lightning rod for wider protests from environmentalists to copper miners in recent months.
Self-made billionaire Pinera is the least popular Chilean leader since General Augusto Pinochet's 1973-1990 dictatorship, according to recent polls, weakening his mandate and hurting his chances of passing key reforms. [ID:nN1E7840FR] [ID:nN1E77P040]
Spending this year is set to grow 4.6 percent from 2010 levels after the government trimmed its spending plans earlier this year to fight inflation pressures. (Editing by Carol Bishopric)
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