President Luiz Inacio Lula da Silva, battered by scandals in his Cabinet, averted two potential crises on Tuesday as his finance minister calmed economic fears in testimony before Congress and lawmakers delayed a vote that could bar a former key aide from political office.
Jittery financial markets slipped, then rose as Finance Minister Antonio Palocci, the architect of Brazil's economic policy, defended his strategy to the Finance and Tax Committee of the Chamber of Deputies, the lower house of Brazil's Congress.
Congressmen reached a deal with the government to have Palocci testify about corruption charges leveled against him by a former aide.
Silva has seen his popularity plunge and a poll released on Tuesday showed his chances of winning a second term next year are uncertain amid the furor over Palocci and former Chief of Staff Jose Dirceu, a longtime friend of the president.
"There's a growing perception of corruption in the government," said Ricardo Guedes, director of the Sensus polling company. "If the trend continues, re-election becomes difficult."
While Tuesday's hearing did not directly address the issue, Palocci also faces allegations he was involved in illegal kickbacks to finance campaigns of the governing Workers Party during his two terms as mayor of Ribeirao Preto, a city of 500,000 people in Sao Paulo state.
Rumors that Silva had already rejected an attempt by Palocci to resign were strong enough that Jacques Wagner, Minister of Institutional Relations, publicly denied them.
Silva's administration was rocked in June by accusations of illegal campaign financing and allegations that Dirceu oversaw a plan to bribe legislators to support the government.
Dirceu -- Silva's top adviser and close friend -- was fighting for his political life as the 513-member Chamber of Deputies prepares to vote on whether to expel him and bar him from public office for eight years.
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