* G8 leaders pledge billions in Arab Spring aid package
* "Historic" move likened to Europe after Berlin Wall fell
* Funds tied to democratic, economic reforms
* Leaders criticise Yemen, Syrian crackdowns
(Edits throughout, adding comment)
By John Irish and Catherine Bremer
DEAUVILLE, France, May 27 (Reuters) - The Group of Eight promised tens of billions of dollars in aid to Tunisia and Egypt on Friday and held out the prospect even more to foster the Arab Spring and the new democracies emerging from popular uprisings.
Likening it to the fall of the Berlin Wall that changed the face of Europe, G8 leaders ending an annual summit in France launched a partnership for North Africa and the Middle East that tied aid and development credits to political and economic reforms by states which have thrown off autocratic rulers.
Most is in the form of loans, rather than outright grants, to the two countries in the vanguard of protest movements which have swept the Arab world from the Atlantic to the Gulf. Egypt and Tunisia are planning to hold free elections this year.
Summit host French President Nicolas Sarkozy said that on top of ${esc.dollar}20 billion of credits provided by the World Bank and similar regional lenders dominated by the major powers, there would be as much again from other sources -- ${esc.dollar}10 billion from oil-rich Gulf Arab states and ${esc.dollar}10 billion in bilateral aid.
In a statement after the two-day summit in the northern French seaside resort of Deauville, the G8 leaders signalled they "strongly support the aspirations of the Arab Spring as well as those of the Iranian people".
"The changes under way in the Middle East and North Africa are historic and have the potential to open the door to the kind of transformation that occurred in Central and Eastern Europe after the fall of the Berlin Wall," the G8 said.
Multilateral development banks "could provide over ${esc.dollar}20 billion, including 3.5 billion euros from the EIB, for Egypt and Tunisia for 2011-2013 in support of suitable reform efforts".
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Full coverage of G8 summit [ID:nLDE74P0DD]
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"TRANSFORMATIONAL"
The package was devised as a blueprint for aid to other Arab countries tussling with democratic reform, some experiencing the sort of street revolutions that brought down Egypt's Hosni Mubarak and Tunisia's Zine al-Abidine Ben Ali.
John Kirton, director of the G8 Research Group at Toronto University, called the summit's achievements historic and said the group was now set on doing for the Arab world what it had done, through credits tied to reforms, for eastern Europe.
"If there was ever a time for the G8 after the post-Cold War victory, it was now, and the Deauville summit got the job done," Kirton said on the sidelines of the summit. "This is as transformational and historic as that was. They've said 'we've done this before and it worked, so we're going to do it again'."
Senior Egyptian and Tunisian officials met the leaders of the G8, which was expanded from seven Western powers to include Russia and bridge the East-West divide after the Cold War. They asked for massive support for their fragile economies.
Tourism, major sources of revenue for both Tunisia and Egypt, has been particularly badly hit by the popular uprisings, which have also spooked international investors.
"We are truly very satisfied with the very strong, clear and precise statements proffered by all of the G8 nations, and the financial institutions," Tunisian Finance Minister Jalloul Ayed told a news conference in Deauville.
"It's very clear that everybody wants to help us."
An International Monetary Fund report on Thursday said the external financing needs of oil-importing Middle East and North African states would top ${esc.dollar}160 billion over the next three years.
The IMF said it could provide ${esc.dollar}35 billion of that, but many states are implementing austerity measures to rein in budget deficits and trim public debt, which could affect the amount they are willing to stump up to help emerging Arab democracies.
"NOT A BLANK CHEQUE"
The European Bank for Reconstruction and Development, created after the Cold War to help former Communist states become market economies, however, is now expanding its mandate into North Africa and the Middle East.
It could invest annually up to 2.5 billion euros (${esc.dollar}3.55 billion) in the region by 2015, with a billion euros going to Egypt, the biggest Arab country with a population of some 80 million, EBRD communications director Jonathan Charles said.
"We are looking at what was really driving the Arab Spring. This is not just the demand for democracy. It is the demand for a better way of life, a better economy, so we should be looking very practically at what we can do to create jobs," he said.
A U.S. official travelling with President Barack Obama was among several to stress that money is tight, that the credits would be forthcoming only if political change went ahead and that the main goal was to help the Arabs help themselves.
"It's not a blank cheque. It's in the context of overall reform programs," said Mike Froman, a deputy national security adviser at the White House. "It's an envelope that could be achieved in the context of suitable reform efforts."
"This is largely a case of trade not aid, investment not assistance over time. It's really about establishing the conditions under which the private sectors in these economies can flourish and the benefits of growth are broadly shared."
"GADDAFI MUST GO"
The groundswell of demand for change in the Arab world, which has spread to Yemen, Bahrain and Syria, has also left Libyan leader Muammar Gaddafi fighting to stay in power.
"He has no future in a free, democratic Libya. He must go," the G8 leaders said, saying he had lost all legitimacy because of his use of force against civilians protesting his rule.
Russia signalled it was ready to mediate in the crisis, Moscow's special representative on Africa Mikhail Margelov telling reporters Russia had contacts in Gaddafi's entourage.
But Sarkozy said: "Mediation is not possible with Gaddafi." And other Western leaders stressed that they were mainly grateful for Moscow's agreement that the Libyan leader should step down, even if Russia has opposed NATO's bombing campaign.
British Prime Minister David Cameron said he did not recall Medvedev's mediation offer and said Britain was sending attack helicopters to Libya to step up pressure on Gaddafi.
Earlier, Obama and Sarkozy said they were determined to "finish the job" in Libya.
G8 leaders said they were "appalled" by the killing of demonstrators opposed to the rule of Syrian President Bashar al-Assad [ID:nLDE74Q0JO], though Deputy Foreign Minister Sergei Ryabkov dismissed the need for a U.N. Security Council vote.
"There are no grounds to consider (Syria) in the U.N. Security Council," he said. A draft resolution was "untimely and damaging," he said, adding: "We will not even read the text."
On Yemen, leaders condemned attacks on protesters seeking the removal of President Ali Abdullah Saleh's and urged him to respect a pledge to stand down. [ID:nLDE74Q0FC]
During their two-day summit leaders also discussed nuclear safety and said the global economic recovery was becoming more "self-sustained", although higher commodity prices were hampering further growth.
They renewed a pledge to wrap up talks this year on Russia's entry into the World Trade Organization and said long-stalled global trade talks were a matter of "great concern" and that they would explore all options to get things moving.
With aid to Arab states dominating, the G8 also issued a special declaration saying it stood side-by-side with Africa and would intensify its efforts to achieve peace and stability, economic development and growth, regional trade and investment. (For TAKE A LOOK on the Deauville G8, click on: [ID:nLDE74P0DD] (For all stories from Deauville G8, click on: [G8-LEN-RTRS]
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