UPDATE 1-Ireland agrees to restore some public-sector pay cuts

(Corrects university in penultimate paragraph.)

* Deal gives government boost before 2016 election

* Lower-paid workers to receive 7 pct pay boost by 2018

* Agreement to cost nearly 600 mln euros over three years

By Padraic Halpin

DUBLIN, May 29 (Reuters) - Ireland (Other OTC: IRLD - news) 's government has struck a deal with trade unions to restore some of the pay cuts imposed on public-sector workers after the country's financial crisis, spending minister Brendan Howlin said on Friday.

Ireland's economy grew faster than any other in the European Union last year as the government ended years of tax hikes and spending cuts, and promised pay rises to the country's 290,000 public-sector workers a year out from elections.

Under the new deal, workers on an annual salary of 30,000 euros or less will receive a pay rise of 7 percent, or just over 2,000 euros, between 2016 and 2018. Those earning over 100,000 euros will get a one percent, or 1,000-euro, increase.

Public servants signed up to cuts averaging 15 percent when the crisis erupted in 2008. They subsequently agreed to maintain industrial peace in return for no more widespread cuts, saving Ireland from the protests seen in other struggling euro zone countries.

"It will reward public servants for their loyalty to the state in the most difficult of times and set out a path of pay recovery for them," Howlin told reporters.

"It matches the requirement of government for prudence to ensure that all the work we've done to sustain a healthy economy is not put in jeopardy in any way,"

The package will cost 566 million euros over the next three years, said Howlin, whose junior party in government, Labour, are closely aligned with the unions and have suffered most in opinion polls over the cuts.

The government has up to 1.5 billion euros extra in its budget for 2016 to divide evenly between additional spending and tax cuts, the majority of which will be used to reduce income tax, Finance Minister Michael Noonan said on Friday.

The talks on the agreement lasted less than three weeks. Once approved by trade union members, the first phase of pay increase will begin in January, four months before parliamentary elections are due.

"If you had said to me even earlier this week that this would be all done and dusted in two and a half weeks, I would have said you're crazy," said Michael Doherty, a lecturer in industrial relations at Maynooth University.

"But obviously we're in a slightly different place. This time, both sides have something to gain. It's a win-win." (Reporting by Padraic Halpin; Editing by Larry King)