Brazil's Lula pledges to attack graft

Battered by accusations that his party paid bribes to buy votes in Congress, Brazilian President Luiz Inacio Lula da Silva vowed to fight corruption even if it meant "cutting into our own flesh."

Investors fear the corruption allegations could paralyze Silva's administration. Stocks fell for the second straight day over concerns about political stability in South America's largest country. Brazil's currency, the real, was down again against the US dollar and the euro.

Addressing a UN forum in Brasilia on Tuesday night, Silva vowed to spare no effort in the fight against corruption.

"We won't protect anyone, we will cut into our own flesh if necessary," Silva told delegates at the opening of the four-day Global Forum on Fighting Corruption.

He also declared he had fired the directors of the postal service and the state-run IRB reinsurance company, but stopped short of announcing a wide-ranging anti-corruption package as many here had expected.

"This is not the right moment to announce administrative measures," Silva said.

But he promised that actions his government were taking would turn corruption into "a sad memory of a past that will not return."

The firings followed the launch of a congressional probe into corruption in the postal service last week, the first major corruption scandal to taint Silva's administration.

That scandal widened on Monday when a senator from the governing coalition said Silva's Workers Party paid monthly bribes to buy votes in Congress.

Silva told the forum that his government was dedicated to investigating all charges and would not oppose a separate congressional probe and was even ready to help it.

"I want to say it very clearly. My government will investigate [the charges of corruption] until the very end ... I have a biography to preserve, a moral patrimony, a decades-long history of defending ethics in politics," Silva said.

Before the speech, analysts said Silva had to explain what he knew about the payoffs in order to restore confidence.

"The crisis has now hit the president himself," said Alexandre Barros of the Early Warning political risk consulting group in Brasilia. "People are asking, `Did he know?' and if he knew, `Why didn't he act immediately?'"