MercoPress. South Atlantic News Agency

Palocci fully ratifies Brazil's fiscal orthodoxy

Brazilian Finance minister Antonio Palocci defended Wednesday before Congress, the government's orthodox economic policy, brushed aside claims of illegal acts or wrongdoings during his time as elected mayor and ignored rumours about his possible resignation.

Mr. Palocci who has become the icon of Brazilian economic stability denied any involvement in alleged corruption accusations during his several years as mayor of an important city in the state of Sao Paulo, before becoming a member of President Lula da Silva's cabinet, which were published in the Brazilian media.

Summoned by the Senate Economic Affairs Committee Mr. Palocci said he was open to any investigation as to his personal conduct and finances and offered no indications of giving up his job because of the claims.

Mr. Palocci went further and ratified before the Senate committee the current austerity and tight money policy he has been implementing since taking office, openly supported by the business community, but which has been under attack from inside the ruling coalition and lately from none less that President Lula's all powerful Cabinet chief Dilma Rousseff.

Saying Ms. Rousseff was wrong in her appreciations, Mr. Palocci insisted that "fiscal responsibility is a fundamental, strategic non temporary strategic issue" and called upon the political establishment to help consolidate the "Brazilian fiscal effort".

"This does not mean increasing the fiscal effort; we don't need a greater fiscal effort, rather a long term effort".

Ms. Rousseff in a published interview stated that the long term program to achieve fiscal discipline was "rudimentary and impacted on growth".

"Economic stability depends on patience and perseverance with the instruments which are used. This helps create greater spaces for growth, savings and investment", said Mr. Palocci who added he saw no signals indicating President Lula da Silva "is planning to change the current economic policy".

Palocci highlighted he was part of the administration to make effective the current economic policy "and not others".

Brazilian political analysts are speculating that Mr. Palocci's tight fiscal policies could be threatening President Lula's bid for re-election next year and several of his close aides are pushing for "flexibility" with the budget.

Ms. Rousseff message was interpreted as signalling an intense inside cabinet infighting regarding the 2006 political agenda.

"Brazil is beginning a long and steady growth cycle, fully consistent", emphasized Mr. Palocci defending his tough fiscal attitude but also conceding that "stability is supported by policies not by names or people".

Former aides of Mr. Palocci when he was mayor claim he was fully aware of a network set up to collect money from private companies and suppliers to finance the political activities of the Workers Party. These funds apparently also included aid from Cuba.

However Mr. Palocci, a former anarchist activist, and his orthodox approach to economics and surplus budgets have turned him into the "stability factor" for the Lula da Silva administration.