UPDATE 2-Spain to approve aid package for companies in March, minister says

(Adds background, details on financial aid)

MADRID, Feb 15 (Reuters) - Spain plans to approve a new aid package to bolster the finances of companies hit by the coronavirus pandemic in March, Economy Minister Nadia Calvino told reporters in Brussels on Monday.

The package will take the form of direct payments to companies considered viable but which are struggling financially because of the pandemic, Calvino said.

“What we are doing is trying to identify those companies that were fundamentally viable before the pandemic hit and whose solvency has been weakened as a result of the sharp drop in activity,” she said.

Nearly one in five companies in Spain may have ended 2020 insolvent as the euro zone’s fourth-largest economy was one of the hardest hit by the pandemic, according to a recent Bank of Spain report.

Several sources told Reuters last week the government was aiming to outline in the coming weeks a set of measures to support companies, possibly including haircuts on state-backed loans as well as direct state aid to help smaller firms weather the COVID-19 pandemic.

The pandemic-stricken economy contracted by a record 11% in 2020 and heightened COVID-19 restrictions imposed since December suggest that expectations of a strong rebound in 2021 may have to be scaled back.

Like many of its neighbours Spain has tightened curbs on movement, restricted business hours and, in some regions, shut down bars and restaurants.

In November, Madrid extended its 140 billion euro ($170 billion) ICO liquidity scheme until June 2021, but that was not enough to offset the impact of the third wave of the pandemic on heavily indebted companies that had been warning for months they would not be able to repay their debts. ($1 = 0.8248 euros) (Reporting by Inti Landauro and Jesús Aguado; Editing by Nathan Allen and David Goodman)