UPDATE 1-Brazil's Temer says sacrifices needed to end "bloated" state

miércoles 1 de junio de 2016 11:48 GYT

(Adds Temer comments, political context)

BRASILIA, June 1 (Reuters) - Interim President Michel Temer vowed on Wednesday not to cut spending on health and education but warned that sacrifices are needed to balance Brazil's public accounts and restore economic growth.

"There is no longer any room in Brazil for a bloated and inefficient state," he said at a ceremony where the new heads of state banks and state-run oil company Petrobras took office.

Temer, who replaced suspended leftist President Dilma Rousseff last month when she stepped down to face a trial in the Senate, criticized the state of the country he inherited, with 11 million unemployed, stubbornly high inflation and a massive budget deficit.

Latin America's largest economy shrank for a fifth straight quarter in early 2016 as a political crisis and sweeping corruption scandal centered on Petrobras weighed on activity, government data showed on Wednesday. Gross domestic product fell 5.4 percent from a year earlier.

Since taking over on May 12, Temer said he had proposed a positive agenda of "national reconstruction," reduced the size of government by having a smaller Cabinet and won approval from Congress for a 2016 fiscal target that reflects a gaping budget deficit that Rousseff left.

He said he will soon send Congress a constitutional amendment limiting federal spending growth to the rate of inflation.

In a reversal of statements by his ministers that caused a public outcry, Temer said there will be no cuts to education and health programs.

Temer also promised to restore financial health to Petrobras , the world's most indebted oil company, which has struggled to tap vast offshore oil reserves.   Continuación...