By Zoran Radosavljevic and Marja Novak
MARIBOR, Slovenia (Reuters) - The walls of the picturesque Slovenian city of Maribor on the banks of the Drava river are covered with graffiti reading "Gotof je!" - "He's finished!".
They are a vivid illustration of the startling crisis that has hit a small country hailed until recently as the star of post-communist transition in eastern Europe and a promising new member of the euro zone.
The graffiti refer to Maribor's mayor Franc Kangler. Thrown out of his party as prosecutors probed allegations of corruption, he is stepping down at the end of this month after two rallies against him turned violent - a sign of the times in a country unused to unrest but now gripped by economic pain and anger at an elite discredited by evidence of graft and cronyism.
New protests are planned for Friday, in Maribor and other towns including the capital Ljubljana. Police, who turned water cannon and tear gas on demonstrators in Maribor, are preparing.
In the most serious violence since Slovenia's two million people broke from Yugoslavia with limited bloodshed in 1991, several towns have seen trouble. In Maribor, the second city, dozens were arrested early in December after protesters hurling firecrackers and chunks of concrete clashed with riot police.
Until this year, Slovenia was widely seen as a calm and prosperous trailblazer among its more troubled in the former Yugoslavia. It joined the European Union in 2004 and three years later, as the IMF put it at the time, "sound macroeconomic policies were crowned with success when Slovenia entered the euro area" - the first ex-communist state to do so.
Despite warnings from the IMF, underlying problems, stemming from generous state benefits, a rigid labor market or state support for favored businesses, were largely hidden until the global crisis that hit Europe's credit markets in late 2008.
Prime Minister Janez Jansa's conservative coalition, which benefited from recession to oust the center-left a year ago, faces no scheduled election until 2015. But the fury of the crowds against Kangler, a coalition ally, has revealed the weight of pressure for change and a potential for instability.
"Maribor is a disaster; only a select few are getting rich, the rest is zero. There is no future for our youngsters," said Zdenka Stojkovic, a pensioner attending a rally there last week.
"I've work hard all my life and now my pension is so small I am ashamed to say. We want something to change, so Slovenia can get back on its feet," she said, as hundreds chanted "Thieves, thieves!" in one of the main squares of the town of 100,000.
Protesters accuse Kangler, who took office in 2006 and was re-elected two years ago, of overseeing a corrupt administration that has sold municipal utilities and services to favored partners while local people have lost jobs in the slump.
Kangler, who is under investigation by national anti-graft police, denies wrongdoing but announced this month he would step down on December 31 to make way for a new election for mayor.
"Kangler was the cause of everything," said another protester, Primoz Horvat, 28. Unemployed for a year, he added: "The social situation in Maribor has hit rock bottom.
"People have no money for food while his own buddies are employed everywhere."
Among irritations to push people onto the streets, was a city contract for a private company that installed speed cameras around Maribor in October. Hundreds of fines, typically of 250 euros - an average week's salary - were handed out on the first day, enraging motorists. Word that the private contractor would keep 90 percent of the money caused new talk of city hall graft.
The Maribor mayor is not unique in his legal problems. Premier Jansa himself faces a trial on charges of taking bribes from a Finnish arms exporter during a previous term in office. And Kangler's counterpart in the capital Ljubljana has also been questioned over corruption allegations.
"It seems it's the same problem everywhere, only we were the first ones to rise," said Maribor protester Horvat. "We need new faces. We've had the same people in power for 20 years."
Jansa's opponent and predecessor as prime minister, Borut Pahor, was elected on December 2 to the figurehead role of president in a rebuff to a government less than a year old as it tries to impose spending cuts and welfare reforms to stave off a need to seek a bailout from EU partners to cover its funding needs.
Things went sour with the onset of the global downturn. From GDP growth in 2007 of 6.9 percent, the highest in the euro zone, Slovenia's export-oriented economy hit a wall, weighed down by lack of demand at home and abroad and a credit crunch caused by mismanagement of local banks. The government expects GDP to shrink 2 percent this year and a further 1.4 percent in 2013.
With unemployment at 12.1 percent, people are unhappy.
"We expected we would easily take over the positive sides of capitalism but were not ready to give up the privileges of the previous system and were not ready to work hard enough to preserve a welfare state with a lot of social security," said Borut Hocevar, a political analyst at Finance daily newspaper.
Exporting Renault cars, Gorenje household appliances and drugs made by Krka and Lek, Slovenia's per capita GDP had reached 91 percent of the EU average in 2008, by far the highest among ex-communist members. But it fell to 84 percent by 2011.
Maribor has fared even worse, with a regional per capita GDP about 84 percent of the national average. Once boasting strong auto, metals, textiles and chemical industries, it had already been in sharp decline after factories lost traditional markets in the rest of Yugoslavia during the wars of the 1990s.
In a sign of hard times, gold-buying shops are flourishing: "We've had a lot of clients in the past year, from young to old, who sell gold jewellery because of financial problems," said Karmen Gaber, 25, a history graduate who works in one of these businesses in Maribor.
Many young people seek work across the border in Austria.
"All the factories have closed," said Kemo Saranovic, who recently took disability retirement at 59. "We haven't had a single new investor here. But things can only get worse because no one in the country is answering the people's cry for help.
"Politicians behave as if they lived in an ivory tower and whatever they say should be the law, beyond reproach."
Pensioner Kristina Resnik, 84, found promises of higher living standards in the EU a distant prospect: "A better life? Perhaps - but for my grandchildren and great-grandchildren.
"As for me, I sold my apartment so I could pay for a room in an old people's home. That means I mustn't live too long," she laughed, "Because costs are going up all the time."
Looking ahead to Friday's rallies, Finance's Hocevar said they reflected a wide spread of discontent over issues ranging from poor local administration and corruption to government efforts to cut welfare benefits inherited from communist times:
"At the moment," he said, "It is not clear whether this wave of dissatisfaction will persist or whether the protests will calm down."
(Editing by Barry Moody and Alastair Macdonald)