By Lamine Chikhi
ALGIERS (Reuters) - Algeria is a young country ruled by old men.
A generation of leaders who won their spurs during Algeria's 1954-62 independence war against France remains in power, having defeated a violent challenge by armed Islamists in the 1990s and, at least for now, seen off the rebellious spirit that toppled Arab autocrats in Tunisia, Egypt and Libya last year.
Among the old guard is President Abdelaziz Bouteflika, 75, who has served three terms and is thought unlikely to seek a fourth, if only for undisclosed health reasons.
But with a presidential election due in 2014 there is no clarity on who might take over Africa's biggest country, an OPEC oil producer which supplies a fifth of Europe's gas imports and cooperates with the West in combating al Qaeda-style militancy.
More than 70 percent of Algeria's 37 million people are aged under 30. About 21 percent of young people are unemployed, the IMF says, and many are impatient with the gerontocracy ruling a country where jobs, wages and housing are the urgent concerns.
"With all due respect, we don't need war heroes to rule the country, but young, well-educated managers who can guarantee us a decent living and who understand young people's aspirations," said Mohamed Aziouz, an unemployed computer engineer aged 26.
"This must change," he said, noting that Interior Minister Daho Ould Kabila is 79 and army chief of staff Giad Salah is 80.
Mortality is already catching up with the National Liberation Front (FLN) cadres who led Algeria to independence 50 years ago and have ruled the country ever since.
This year alone, the country's first president, Ahmed Ben Bella, died at 96, and its third, Chadli Benjedid, at 82.
TIME TO MOVE ON
Ahmed Benbitour, 66, a former prime minister who resigned under Bouteflika in 2000, believes generational change is overdue. "Algeria's rulers should be 40. All the rulers who served during the past decades should go," he told Reuters.
In theory, it is up to Algerian voters to choose their president and parliament. But many Algerians believe their country is controlled by "le pouvoir", a French term for an unelected elite led by senior security officials.
Bouteflika and these alleged power-brokers may eventually pick a preferred successor, legitimizing their choice with an election contested by other approved contenders - although dissension among the elite could disrupt any such tidy outcome.
While Algerians may not feel fully enfranchised, despite the trappings of constitutional rule, few want a return to the turbulence of the 1990s when a decade-long struggle between the state and Islamist militants killed an estimated 200,000 people.
The Islamic Salvation Front (FIS), which was set to win the 1992 election when it was canceled by the army, remains banned.
Moderate Islamist parties performed below expectations in a parliamentary poll in May this year, winning 10 percent of seats to the FLN's 47 percent, on an official turnout of 43 percent.
Those parties, co-opted by the state, have little popular appeal and are in no position to compete for the top job. A few hardcore al Qaeda-linked militants still fight on in remote areas, but no longer threaten Algeria's stability.
A significant current of ultra-orthodox Salafi Islamists shuns politics because it believes God is the only reference for governing society, not democratically elected leaders.
For now, political Islam has been mostly discredited, but the constitution says that Islam is the religion of the state and Algeria's rulers cloak themselves in Islamic respectability.
Many in Algeria might settle for an imperfect democracy in return for stability, jobs and better living standards.
A wave of unrest over pay and living conditions in February and March 2011 briefly suggested the country might experience an uprising such as those erupting elsewhere in the Arab world.
But the government quickly increased wages and social spending to defuse discontent, using the financial muscle from oil and gas revenues that have enabled Algeria to build up foreign reserves exceeding $186 billion.
Since then, chaos in post-Gaddafi Libya and the violent conflict in Syria may also have made Algerians leery of revolt.
Perhaps sensing the danger has passed, the government now plans to re-tighten the tap, with a draft 2013 budget obtained by Reuters this week that would slash outlays by 11.2 percent.
The draft is based on a world oil price of $90 a barrel, although the International Monetary Fund says Algeria needs an oil price of $100 to balance its books.
Algeria relies heavily on its hydrocarbons sector, which accounts for about 60 percent of budget revenue, 36 percent of economic output and more than 97 percent of export earnings - so any slump in world oil prices would spell trouble.
The economy has moved away from its socialist past, but remains constrained by red tape and corruption, attracting few foreign investors outside the dominant oil and gas sector.
Denied opportunity at home, many Algerian youngsters dream of a better life overseas, with hundreds each year desperate enough to risk their lives on illegal sea crossings to Europe.
For now the expected transition from Bouteflika remains murky. The president took four months to name a prime minister after the parliamentary poll in May, finally choosing Abdelmalek Sellal, a technocrat whom few see as his anointed heir.
Nacer Djabi, who teaches sociology at Algiers University, says bringing more youthful faces into power could help transform the economy and avert potential strife.
"If the generation of Algeria's current rulers refuses to organize its peaceful withdrawal from civilian and military decision-making circles, a clash with the new generation will be inevitable," he said, urging them to hasten the process.
"They may die before handing over power, which could put at risk Algeria's cohesion and internal stability."
(Editing by Alistair Lyon and Jon Boyle)