Brasilia: Brazil's President Michel Temer reeled on Thursday from a report that he authorised payment of hush money to a jailed politician in a scandal threatening to plunge Latin America's biggest country into political meltdown.
Markets plummeted on opening as investors reacted to the crisis, as well as turmoil around US President Donald Trump, with fears that Temer's center-right government will be hamstrung in its attempt to push through austerity reforms.
Demands for Temer's impeachment and new elections sprang up from opposition lawmakers, while small crowds appeared in Sao Paulo and Brasilia overnight shouting: "Temer out."
In another blow for the veteran leader of the PMDB party, the prosecutor general asked for authority to arrest his key ally Senator Aecio Neves from the PSDB party on bribery charges.
The Supreme Court suspended Neves and was to decide later on his arrest. Officers could be seen entering Neves' property in Rio de Janeiro and his sister Andrea was arrested in Belo Horizonte.
The crisis leaves Temer, 76, facing two immediate problems.
The first is his own political survival, and the second is the survival of the reforms which he says are needed to whip Brazil's floundering economy back into shape after two years of recession.
Temer's office announced that he was cancelling his previously scheduled back-to-back meetings with party leaders. Brazilian media reported that he could make a public statement.
Temer, who took over after the impeachment last year of Dilma Rousseff, was reported late Wednesday by O Globo newspaper to have been secretly recorded agreeing to payments of hush money to Eduardo Cunha, the disgraced former speaker of the lower house of Congress.
According to the report -- which Temer immediately denied in a written statement -- the president discussed the matter with Joesley Batista, an executive from the meatpacking giant JBS, on March 7.
Batista told Temer that he was paying money to make sure that Cunha -- thought to have encyclopedic knowledge of Brazil's notoriously dirty political world -- would keep quiet while serving his sentence for taking bribes.
According to the account, Temer told Batista: "You need to keep doing that, OK?"
Temer's office issued a statement saying: "President Michel Temer never solicited payments to obtain the silence of former deputy Eduardo Cunha."
Globo did not say how it got the information about the recording, which it said was offered in a plea bargain between Batista and his brother Wesley with prosecutors. The columnist who reported the bombshell claims clarified on Thursday that he had not personally heard the recording, but that it was described to him "in the most detail possible."
A separate secret recording made by Batista allegedly caught Neves asking him for a bribe of two million reais, or around USD 600,000.
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