BRASILIA--Brazilian President Michel Temer vetoed on Wednesday part of a bill that gives cash-strapped states a temporary pardon on their debts to the federal government to ease their fiscal woes, raising tensions with Congress over the measure.
The lower house of Congress last week surprised the Temer administration by scrapping a clause in the bill that forced states in the worst financial condition to take tough austerity measures in exchange for debt relief. The government vetoed those changes, presidential spokesman Alexandre Parola said on Wednesday.
Temer's team is working on a new bill to re-establish the austerity measures, which include a freeze on wages and an increase in pension contributions, said a presidential aide who asked for anonymity to speak freely on the matter.
Temer will keep the remainder of the bill, which lowers reduces debt payments and extends the maturity on 427 billion reais ($127 billion) of debt owed by all of the 27 states. In a statement, the Finance Ministry said it will continue to work to find a solution to the states' fiscal woes.
The changes passed in the lower house forbid the government from helping cash-strapped states such as this year's Olympics host Rio de Janeiro without breaking the fiscal responsibility law, said a source at the Finance Ministry. States such as Rio de Janeiro have struggled to pay salaries for police and doctors and to keep hospitals stocked with medical supplies, provoking violent clashes between police and protesters enraged by the shortages.
