Portugal's Treasury chief forced to quit over previous job severance

LISBON (Reuters) - Portugal's newly-appointed head of Treasury has stepped down, the finance ministry said, her resignation following a public backlash over a hefty severance pay she had received from state-owned airline TAP that was bailed out with taxpayer money.

Coming amid a cost-of-living crisis affecting millions in Portugal and Europe, the case of Alexandra Reis has embarrassed the Socialist government of Prime Minister Antonio Costa since the Correio da Manha newspaper reported about the 500,000-euro ($531,450) compensation earlier this month.

Opposition parties have sharply criticised the government's lax hiring practices and demanded that Reis be sacked and return the money paid by TAP over ceasing her functions as a board member on mutual agreement last February.

Reis, who only took over the Treasury department on Dec. 2, argued she had demanded what she was legally entitled to, as the government and the airline later confirmed.

Finance Minister Fernando Medina said in a statement released just before midnight on Tuesday that he had asked Reis to present her resignation as treasury secretary, "which she promptly accepted".

"I took this decision so as to preserve the political authority of the Finance Ministry at a particularly delicate time for millions of Portuguese," he wrote, also lauding Reis for "safeguarding the public interest" with integrity, but making no mention of the compensation money.

TAP, in which the Portuguese state has a 72.5% controlling stake, was saved by a 3.2-billion-euro rescue plan approved by Brussels. It has reduced its fleet, eliminated more than 2,900 jobs and cut wages in an attempt to return to profit in the next few years.

($1 = 0.9408 euros)

(Reporting by Andrei Khalip; Editing by David Latona and Tomasz Janowski)