Brazil states ease tough austerity measures

BRASILIA: Governors of cashstrapped Brazilian states on Thursday got President Michel Temer to bow to their demands to relax tough austerity measures, throwing the country’s pledges to rebalance its depleted accounts further into doubt.

Disagreements between the federal and state governments over the austerity deal to assuage their financial woes have raised fears of a full-blown crisis that could stoke a recession already threatening to stretch into a third year.

Struggling to pay their pensioners and employees, many governors have accused Temer of trying to impose harsh measures in exchange for revenues from an asset repatriation amnesty that they argue states are entitled to.

After meeting with Temer, Santa Catarina Governor Raimundo Colombo told reporters the states will work on a “general commitment” to seek measures to limit their spending and reform their pension systems to reduce their budget deficits over 10 years.

Piaui Governor Wellington Dias, a member of the opposition Workers’ Party who heads a forum that represents all governors, said earlier the states had agreed to enact their own measures as soon as possible without any imposition for the federal government.

In the original deal, billed last week as a national pact, the government said it was going to share 5 billion reais ($1.4 billion) from an asset amnesty programme with states if they freeze wages for two years, cut expenditures on contractors by one-fifth, and overhaul their pension systems.