UPDATE 2-Spain extends foreign takeover curbs to help aid recovery

* Restrictions extended by one year until end of 2022

* Measures to apply to investments over 500 mlns euros

* State-backed loans, investment aid prolonged until June (Adds details on support measures, government comment)

By Jesús Aguado and Belén Carreño

MADRID, Nov 23 (Reuters) - Spain on Tuesday approved a year-long extension, until the end of 2022, to restrictions on foreign takeovers of Spanish companies it regards as strategic.

As part of measures to protect Spanish firms in the face of the coronavirus pandemic, Madrid imposed a process of authorization for the acquisition by a foreign company of stakes larger than 10% in companies considered to be strategic.

The decision to extend the potential veto comes after U.S. firm KKR offered to buy Telecom Italia for 10.8 billion euros ($12.2 billion) in what would be Europe's biggest private equity buyout.

Shares in TIM's Spanish rival Telefonica rose 6.4% on Monday on speculation it could also become a target, although they pared most of those gains on Tuesday as the government looked set to extend the restrictions.

"It is a question of providing legal certainty and continuing to support companies so that they can progress in economic recovery," government spokesperson Teresa Rodriguez told a press briefing after a weekly cabinet meeting.

The extension applies to listed and unlisted companies if a potential investment exceeds 500 million euros ($562 million), Spain's Economy Ministry said in a statement.

The government has used the measure to delay a partial takeover attempt earlier this year of power utility Naturgy by Australian investment fund IFM.

Its extension indicates that Madrid would not back a bid for Telefonica, which is considered a strategic asset, Caixabank BPI said in a note to clients.

The extended restriction, which also applies to bids from EU-based companies, is part of a series of wider measures announced on Tuesday.

These include the extension until June of a programme of around 100 billion euros in state-backed loans and 40 billion euros in investments to help Spanish companies and households to through the crisis.

The measures follow the EU's decision to prolong temporary state aid until June 2022 and investment support measures until the end of 2022.

Among others being rolled over in Spain are the extension of a moratorium on forced bankruptcy proceedings on companies. ($1 = 0.8890 euros) (Reporting by Jesús Aguado and Belén Carreño; Additional reporting by Emma Pinedo; Editing by Inti Landauro, David Goodman and Alexander Smith)