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UPDATE 1-Portugal says TAP can still use rescue loan despite court ruling

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LISBON, May 25 (Reuters) - Portugal’s Economy Minister said on Tuesday last week’s ruling by Europe’s second-highest court against a 1.2-billion-euro rescue loan to TAP airline did not hinder negotiations on its restructuring plan and TAP could continue using that money.

The Luxembourg-based General Court on Wednesday upheld Ryanair’s fight against the rescue loan TAP received in 2020 from the state, with the European Commission’s blessing, on the grounds that European regulators failed to justify the huge cash injections.

“This decision that the court took for formal reasons, over a lack of adequate reasoning, does not have an immediate impact, nor does it suspend the possibility of TAP continuing to benefit from the loan,” Pedro Siza Vieira told Reuters.

Rather, the minister said, the court gave the Commission a period of time to continue analysing TAP’s situation “and then take a properly reasoned decision”.

Asked whether the ruling could hinder the negotiations with the European Commission over TAP restructuring plan, he said: “I think not.”

The Commission has said it will study the ruling before deciding on its next steps.

If Brussels rejects Lisbon’s restructuring plan for TAP, which involves a proposed 2,000 job cuts by 2022 and pay cuts of up to 25%, TAP would have to immediately repay the rescue loan, which could lead to its insolvency.

TAP reported a record 1.2 billion euro loss last year amid the pandemic.

“Portugal has a strategic interest in maintaining TAP as a company with its own brand and with its operations centre in Lisbon,” he said.

“The state aid is truly an investment because TAP is viable in the medium and long term,” he added. (Reporting by Sergio Goncalves; editing by Andrei Khalip and Jason Neely)

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