Brazil's Temer: 'I won't resign' amid corruption allegations

Brazil's Temer: 'I won't resign' amid corruption allegations

Brazil's government plunged into crisis on Thursday, after a newspaper report alleged that President Michel Temer had condoned a bribe to a politician to keep him from testifying on corruption.

"I can't see how Temer survives this", said David Fletcher of the University of Brasilia.

The scandal comes at a crucial time for Brazil, which is mired in its worst recession in decades, the economy having shrunk almost 8 percent in the last two years with more than 14 million people unemployed.

The Bovespa index crashed more than 10 per cent after opening, triggering an automatic suspension of trading for 30 minutes.

The U.S. currency on Thursday gained 8.06 percent against the Brazilian real, which posted the highest losses since the country devalued its currency in 1999.

On Thursday, police searched Neves' Rio de Janeiro home and Brasilia office.

The recordings also implicate senator and former presidential candidate Aecio Neves, who reportedly asked Batista for almost $600,000 to pay for his defense in the Car Wash Corruption Probe. Temer has denied the pay-off allegations, though he admitted to meeting with Batista last March.

Amid calls for his resignation from the public and politicians alike, President Michel Temer is now under investigation by the Supreme Court, accused of authorising bribe payments to allegedly silence a jailed former party ally.

O Globo reported that Mr. Batista told Mr. Temer about regular payments to Mr. Cunha, and that the president said Mr. Batista should continue the payments. Instead, the veteran center-right politician - who took over previous year with a promise to restore Brazil's stability after the impeachment of leftist president Dilma Rousseff - came out swinging.

Temer is deeply unpopular but has been able to rely on a dominant alliance between his centre-right PMDB party and the PSDB Social Democrats, along with a coalition of smaller parties. He came to power as interim president after embattled former President Dilma Rousseff was suspended and impeached on charges of financial mismanagement.

Temer, having said on Thursday that he would support a full investigation into the allegations, concluded after hearing the tape that there was nothing in it to incriminate him and that the investigation should be shelved, a presidential aide told Reuters.

At the same time, a massive corruption scandal involving the state oil company Petrobras was unfolding. Since launching three years ago, the "Car Wash" probe into billions of dollars in kickbacks has put several top businessmen and politicians in jail.

"As a Brazilian citizen I am obliged to demand our president's resignation and direct elections so that Brazil can decide its future", said history professor Jose Vicente, 51, who was at the Rio protest.

Impeachment is more likely, since an impeachment request was filed in the lower house shortly after the O Globo report broke. Temer is reportedly heard on the tape telling Batista, "You've got to keep this up, OK?" In April, it came to light that eight of his Cabinet ministers are being investigated in several corruption cases related to bribery or accepting campaign donations from Brazilian constructor Odebrecht, one of the central companies that participated in the mammoth kickback scheme at Petrobras.

The Eurasia risk consultancy said the new allegation could be a big problem for Temer.

Claudia Calich, manager of the M&G Emerging Markets Bond fund, says structural reforms, especially the pension reform, seem to be "pretty much dead in the water now" and the uncertainty could threaten the country's stabilisation after two years of recession.

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