UPDATE 4-Brazil gov't denies illegal funding, says can defeat impeachment
(Adds official comments on campaign donations, impeachment vote)
By Silvio Cascione and Anthony Boadle
BRASILIA, April 7 (Reuters) - Brazilian President Dilma Rousseff's government rejected new accusations on Thursday that her election was illegally funded with graft money and expressed confidence it can block an attempt to impeach her.
Executives from Brazil's second-largest engineering company testified that Rousseff's 2014 re-election campaign was partly funded by kickbacks from large infrastructure projects, according to a report by the Folha de S. Paulo newspaper.
The testimony, part of a plea bargain with 11 executives of builder Andrade Gutierrez, would be the strongest link yet between Rousseff's campaign and a widening corruption investigation that has toppled her associates and dozens of other political and corporate officials.
The main opposition party PSDB has demanded that electoral authorities strike down Rousseff's 2014 victory and call for new elections later this year. The effort is separate from ongoing impeachment proceedings in Congress over allegations Rousseff manipulated budgetary accounts to boost her 2014 re-election campaign.
Uncertainty over the leftist leader's future has riled Brazilian markets, with investors banking on more business-friendly policies if she is removed. Risk consultancy Eurasia sees 75 percent odds Rousseff will not finish her term as she battles impeachment, a deep recession and a Zika virus outbreak as Brazil prepares to host the Olympic Games in August.
Rousseff's Workers' Party and her spokesman Edinho Silva, who was her campaign treasurer, rejected the new allegations as false and said all campaign donations were legal and duly reported to electoral authorities. They also dismiss the alleged irregularities in the impeachment effort.
Rousseff, Brazil's first female president, slammed the deliberate leaks to the media of plea bargain testimony obtained by prosecutors and said the disclosures were politically motivated to oust her. Continuación...