Rousseff's austerity plan for Brazil runs into trouble with allies

viernes 13 de febrero de 2015 12:23 GYT

By Anthony Boadle and Alonso Soto

BRASILIA Feb 13 (Reuters) - President Dilma Rousseff's austerity push has run into stiff opposition from her own allies in Congress that could derail her efforts to restore Brazil's fiscal credibility and avoid a damaging credit rating downgrade.

The leftist leader's allies, including members of her own Workers' Party, are seeking to water down a first batch of unpopular bills that trim unemployment and pension benefits and save some 18 billion reais ($6.32 billion).

The bills are part of an austerity drive led by Finance Minister Joaquim Levy, a fiscal conservative picked by Rousseff to plug a growing public-sector deficit with spending cuts and tax hikes aimed at saving the once booming economy's coveted investment grade.

If Brazil can't get its fiscal house in order, it could suffer additional credit rating downgrades pushing its debt into junk territory - a move that would be devastating for an economy that badly needs to woo investment to bounce back from an economic slump now in its fifth year.

Labor unions, which have been loyal partners of Workers' Party governments since 2003, feel the Rousseff administration has betrayed its leftist ideals and are planning demonstrations in March to stop approval of the bills.

"We're going to take to the streets. Nobody wants to lose rights," Miguel Torres, the head of the 14-million-strong Força Sindical labor federation, told Reuters. He said Levy should tax wealth and capital repatriation by foreign companies instead.

To recover investor confidence, Rousseff faces the difficult task of tightening purse strings just as Brazil's economy is sliding toward recession and industries are increasing layoffs. The downturn, along with a massive corruption scandal at state-run oil giant Petrobras, has pushed Rousseff's approval rating to an all-time low, weakening her position in Congress.

Lindbergh Farias, a Worker's Party senator, said chipping away at labor benefits amounts to political suicide at a time when Rousseff could need workers' support on the streets to fend off any effort to impeach her over the scandal at Petrobras , whose board she presided over from 2003-2010.   Continuación...