UPDATE 1-ILVA rescue plan to go before Italy cabinet on Friday

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ROME Nov 29 (Reuters) - The Italian cabinet will be presented with a plan on Friday to secure the future of Europe's biggest steel plant and protect 20,000 jobs, ILVA said in a statement.

Prime Minister Mario Monti met company management on Thursday to hammer out a rescue plan for the plant, a big employer in a region of high joblessness and economic stagnation, which is threatened with closure over an alleged environmental disaster.

A plan to clean up the plant while ensuring its future will go before the cabinet on Friday, according to a company statement.

"This is a real test for Italy," Monti said at the meeting according to the statement.

"We cannot afford to give an image of Italy as a country where it is not possible to reconcile respect for the judiciary, protection of employment, health and the environment, with maintaining a strategic sector such as steel."

A court forced the sprawling plant, which produced almost 30 percent of Italy's steel output last year, to halt production this week over concerns toxic factory emissions increased deaths from cancer and respiratory diseases in the surrounding area of Taranto in southern Italy.

The case has proved a challenge to Monti's technocrat government as it tries to balance health and environmental concerns with pro-growth policies to pull debt-burdened Italy out of a long recession.

The factory is one of a shrinking number of major manufacturing employers in the underdeveloped south, and there are concerns about a wider effect on Italian industry were the site to close.

The head of Italy's steel makers association told Reuters on Wednesday the factory's closure would cost manufacturers up to 5 billion euros ($6.5 billion) in extra costs and force other companies to shut.

"The manufacturing sector lives because it can get steel in Italy. If it has to import it, it will lose its competitive edge," Federacciai President Antonio Gozzi told Reuters in an interview.

A tornado hit the factory on Wednesday, injuring dozens and adding to chaos at the troubled factory, which was stormed by workers the previous day in a strike over possible lay-offs. [ID: nL5E8MS62S] ($1=0.7705 euros) (Reporting by Naomi O'Leary; Editing by Mike Nesbit)