Portugal's Social Democratic Party contender for PM wants full privatisation of airline TAP

By Sergio Goncalves and Andrei Khalip

LISBON (Reuters) - Portugal will fully privatise flag carrier TAP if the opposition Social Democratic Party (PSD) wins a snap election in March and forms a new government, PSD leader Luis Montenegro told Reuters on Tuesday.

Experts have said that the privatisation of the airline and Portuguese green energy investments that require European Union funds are at risk of being derailed in the wake of last month's collapse of the Socialist government.

Montenegro said the PSD's position is very clear: "it is the full privatisation of TAP's capital, obviously with specifications safeguarding Lisbon's hub and also its main connections" to Portuguese-speaking countries as well as the United States.

"We will launch it immediately after the new government takes office," he said in his first interview with an international media outlet as a candidate for Prime Minister.

The outgoing Socialist government approved the sale of at least 51% of TAP in September. The privatisation has already attracted interest from Lufthansa, Air France-KLM and British Airways owner IAG.

Montenegro also warned that EU recovery funds have "a low execution rate" in Portugal and the plan "was not well designed" as it prioritised public investments over private companies.

"If there's still time, I'd really like to reformulate the recovery and resilience program to be more effective and active in boosting the economy," he said, adding that he feared that Portuguese companies could lose competitiveness in the long term.

Portugal has received 2.7 billion euros in EU post-pandemic recovery funds, but needs to accelerate the approval of projects that qualify for such aid if it is to make use of the 22 billion euros on offer by the 2026 deadline. Only 12% of the funds have been deployed so far.

Montenegro said he hoped the resignation of Prime Minister Antonio Costa on Nov. 7 over an investigation into alleged illegalities in his government's handling of "green" energy projects will not affect investment in the country, but that the incident also underscored the need for a political change.

"Portugal has the conditions to present itself in the international context as a credible, stable country, as a country worth investing in," he said.

(Reporting by Sergio Goncalves and Andrei Khalip; Editing by Alexandra Hudson)