* Turkish PM reveals employment stimulus package
* Package to benefit poorer regions of country
* Corporate taxes to be cut to 2-10 pct
* Tax breaks, hand-outs available to large investors
By Hatice Aydogdu
ANKARA, June 4 (Reuters) - Turkey's Prime Minister on Thursday unveiled fresh incentives to fight record unemployment and boost the ailing southeast, but these met with only lukewarm reaction amid repeated calls for a new deal with the IMF.
Prime Minister Tayyip Erdogan, whose government is fighting a chronic economic slump in Turkey, told a news conference corporate taxes would be cut to 2-10 percent depending on the local region, a loan guarantee fund for small and medium-size firms would be set up and large investors would get benefits.
Corporate tax in Turkey is currently 20 percent.
The measures come despite warnings from economists and the International Monetary Fund that unchecked spending could put upward pressure on Turkey's debt and inflation and hit investor confidence in the country.
"We will remain sensitive to fiscal discipline. It is out of the question that we make concessions. We have the strength to put balances back on track," Erdogan said.
Turkish markets showed little reaction to the new measures,
with stocks <.XU100> closing morning trading down 0.48 percent,
and the lira
"The talks with the IMF are continuing...There is no rupture with the IMF currently. Some market players may have expectations but the government of Turkey should not be in a position of having to say 'IMF or nothing'", Erdogan said.
Turkey has been locked in fruitless negotiations with the IMF since its last loan deal expired last year's May, with both sides at odds over levels of government spending.
"I'm not impressed with the measures... what markets would have preferred is a deal with the IMF with the attendant fiscal discipline measures," said economist Inan Demir at Finansbank.
"The most important part of the new measures is the loan guarantee fund although it could have been larger. As for regional stimulus measures I think these will only spur a relocation of investment rather than new investment," he added.
Erdogan said the government would try to attract transit pipeline investments with incentives, meet social security payments for investors for a limited time and cover loan interest payments for those in less developed regions.
Tax breaks would be offered to companies investing more than 250 million lira ($160 million).
The government has already been forced to drastically revise its 2009 budget deficit target, as it seeks to spur domestic consumer demand which accounts for some 70 percent of GDP.
Turkey's economy shrank 6.2 percent in 2008's last quarter, and economists expect a double-digit contraction in the first quarter. Quarterly GDP data will be announced on June 30.
Unemployment has risen to a record high of 16.1 percent.
Erdogan, who said those aspects of the package related to labour would cost just under 1 billion Turkish lira ($648.1 million), said this week he believes the economy will return to positive growth as early as this summer, but the IMF is more pessimistic and expects GDP to decline 5.1 percent this year.
Economic contraction means escalated political risks in a country with chronic tensions between secularist and Islamist camps. One in three Turkish youths is without a job and nearly a million is added to the pool of job-seekers every year.
A previous stimulus package that took affect in March for three months, slashing sales tax rates on cars, white goods and electronics helped boost consumption, although Turks reached for their savings rather than take on fresh debts.
Erdogan has said the government is yet to decide whether it would extend the scheme, due to expire on June 15.
Unlike many Western countries Turkey did not resort to sweeping stimulus packages early this year as it hoped the Turkish private sector's dynamism and the relative absence of household debt would help it emerge from the crisis earlier.
However, economists and business groups have called for a new funding deal with the IMF for months, saying this would ease concerns about government and corporate debt roll over. (Additional reporting by Daren Butler, writing by Alexandra Hudson, editing by Mike Peacock/Toby Chopra)