Brazil markets spooked by minister's complaints on pension reform

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RIO DE JANEIRO (Reuters) - Brazil’s economy minister and lower house speaker exchanged harsh words on Friday over progress on pension reform, creating another drag on Brazilian financial assets already feeling the heat from global market weakness.

Brazil's Economy Minister Paulo Guedes attends a news conference in Brasilia, Brazil June 12, 2019. REUTERS/Adriano Machado

Economy Minister Paulo Guedes kicked off the spat, spurning a congressional committee report for what he called excessive changes to the government’s pension reform bill such as scrapping a plan to launch private savings accounts.

Rodrigo Maia, speaker of the lower house of Congress, hit back at the criticism, saying the collective will had prevailed as it should in a democracy. “We’re not going to pay attention to Minister Paulo Guedes and his recent aggressions against the parliament,” Maia said in a TV interview.

The complaints from Guedes, coming a day after President Jair Bolsonaro’s chief of staff had touted the congressional pension reform report as a “huge victory,” raised concerns about more tension between the government and Congress.

After clashes with lawmakers in recent months, Guedes had struck a more conciliatory tone, contributing to investors’ hopes for a swift approval of the landmark reform to boost public finances. But his disdain on Friday was striking.

Speaking in Rio de Janeiro, Guedes said only a bill generating around 1 trillion reais ($256 billion) of savings over the next decade would represent real reform of the country’s bloated social security system, but around 860 billion meant the issue would need revisiting in five or six years time.

On Thursday, the special committee on pension reform’s long-awaited report recommended changes to the original draft, reducing the government’s planned 1.237 trillion reais of savings to 913 billion reais.

Analysts expect that to be watered down further, but the consensus still appears to be that anything above 800 billion reais would be regarded as a major stepping stone toward putting the country on a more stable financial footing.

Brazilian markets rallied on Thursday, but the political noise soured the taste on Friday, and Guedes came under fire.

“He said what everyone thought, but he shouldn’t have said it,” said a fund manager in Sao Paulo who was not authorized to speak with the press.

The real fell around 1.2% to 3.90 per dollar, its worst day since the end of April, and the benchmark Bovespa stock market fell 0.74%.

Guedes criticized the committee’s report for excluding a transition to private savings accounts, reforms of state and municipal government pensions and changes to how older, disabled and rural workers are treated.

Maia said the special committee will vote on the bill around June 25-26, then present it to the plenary for final lower house approval before a congressional recess in late July.

Reporting by Rodrigo Viga Gaier and Maria Carolina Marcello; Writing by Jamie McGeever; Editing by Chizu Nomiyama and Will Dunham

Our Standards:The Thomson Reuters Trust Principles.

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Moldova Democratic Party says steps down from power

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CHISINAU (Reuters) - The Democratic Party of Moldova said on Friday it would step down from power and dismiss Prime Minister Pavel Filip’s government.

“The resignation of the government of Pavel Filip is the only possible and legitimate solution to prevent a political crisis,” Vladimir Cebotari said in a televised briefing.

Moldova has been in turmoil for the past week as two rival governments tussled for control of the east European country. Maia Sandu was nominated as Prime Minister last weekend, but Filip’s camp refused to recognize her government’s legitimacy.

Reporting by Matthias Williams and Alexander Tanas; Editing by Hugh Lawson

Our Standards:The Thomson Reuters Trust Principles.

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Spain court blocks jailed Catalan separatist from collecting MEP credentials

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FILE PHOTO: Jailed Catalan politician Oriol Junqueras attends the first session of parliament following a general election in Madrid, Spain, May 21, 2019. Bernat Armangue/Pool via REUTERS/File Photo

MADRID (Reuters) - Spain’s Supreme Court on Friday blocked Catalan separatist Oriol Junqueras from leaving jail to collect his credentials for the European Parliament, to which he was elected on May 26.

Without the credentials, Junqueras, who is in prison awaiting the conclusion of a high profile trial on Catalonia’s bid for independence from Spain, is unable to claim his seat in the European legislature.

The court said its ruling did not mean he would permanently lose his European seat and that he must remain in jail while it concludes its deliberations surrounding the trial of 12 Catalan political leaders who led the region’s secession push in 2017.

Junqueras had been set to temporarily leave the prison where he has been held since 2017 on Monday to collect the papers.

Catalonia’s independence drive has overshadowed Spanish politics for years and is a major test for Pedro Sanchez’s Socialists after they won a national election in April but fell short of a majority.

Junqueras, the former deputy head of the region, is charged with rebellion, sedition and misuse of public funds for his part in organizing a referendum and declaration of independence that were deemed illegal by Spain’s Constitutional Court. He denies the charges.

Two other Catalan politicians won European Parliament seats in May but have also been unable to formalize their places because they will be detained if they return to Spain to collect their MEP papers.

The region’s former leader Carles Puigdemont and local council member Antoni Comin have both lived in self-imposed exile in Belgium since arrest warrants were issued following the attempted secession.

Junqueras was allowed to leave jail in May to collect his credentials as a member of Spain’s lower house of parliament following April’s election although he will not be able to serve as a lawmaker until the trial is concluded.

Reporting by Belen Carreno; Writing by Paul Day; Editing by Jesus Aguado and Catherine Evans

Our Standards:The Thomson Reuters Trust Principles.

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Brexit supporter Johnson far ahead in contest to replace British PM

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LONDON (Reuters) - Boris Johnson, who has pledged to deliver Brexit on Oct. 31, surged closer to power on Thursday, winning by far the most support from Conservative lawmakers in the first round of the contest to replace Prime Minister Theresa May.

Three years since voting 52%-48% to leave the European Union, the United Kingdom is heading toward a possible crisis over Brexit as most of the candidates vying to succeed May are prepared to leave on Oct. 31 without a deal.

While parliament has indicated it will try to stop a no-deal Brexit, which investors warn would hurt financial markets and the world economy, some of those running say it may be the only way for Britain to leave the bloc without further delay.

Johnson, the face of the official campaign to leave the European Union in the 2016 referendum, won the support of 114 Conservative lawmakers in the first round of the contest to replace May. A total of 313 lawmakers voted.

“Thank you to my friends and colleagues in the Conservative & Unionist Party for your support. I am delighted to win the first ballot, but we have a long way to go,” Johnson said on Twitter.

His closest rivals were: Jeremy Hunt, the foreign minister, who won 43 votes; Michael Gove, environment minister, with 37 votes and Dominic Raab, former Brexit minister, on 27 votes.

Sajid Javid, interior minister, came fifth with 23 votes. Matt Hancock won 20 votes and Rory Stewart 19. Three were knocked out: former leader of the House of Commons Andrea Leadsom, Mark Harper and Esther McVey.

Betting markets give Johnson, who has a long record of scandals and gaffes, a 70% probability of winning the top job.

SECOND ROUND

Johnson, a former London mayor and foreign minister, has spent weeks wooing Conservative lawmakers, staying out of the spotlight with a low-key campaign at odds with his flamboyant publicity stunts of the past.

But his spokesman, while celebrating a higher-than-expected number of supporters, said there was still “a long way to go in the contest and you have to hold the numbers to go into the next rounds and that’s the challenge”.

The second round is due on June 18 with further ballots planned for June 19 and June 20 until there are just two candidates. A postal ballot of the wider Conservative Party membership will then be held to pick a leader.

A new prime minister should be chosen by the end of July. There had been speculation that the contest could be accelerated due to Johnson’s strong lead but there was no immediate sign of rivals bowing out of the race.

Some were quick to make veiled warnings about the frontrunner.

PM hopeful Boris Johnson leaves his home in London, Britain, June 13, 2019. REUTERS/Simon Dawson

Hunt, who has pitched himself as a unifier of both Brexit-supporting and pro-EU Conservatives, warned members of the party that “the stakes have rarely been higher for our country”. “This serious moment calls for a serious leader,” he tweeted.

Stewart, who has criticized Johnson for making promises on Brexit he cannot keep, voiced optimism about his campaign: “This is amazing - we’re getting some real momentum here ... It’s increasingly clear it’s me against Boris. And let’s win.”

Finance minister Philip Hammond, who has not publicly endorsed a candidate, wrote on Thursday to all remaining leadership contenders to urge them to stick to existing budget rules until at least the next scheduled election in 2022.

Johnson has proposed cutting income tax to 20% from 40% for those earning 50,000-80,000 pounds ($65,000-$105,000), while Gove has suggested replacing value-added tax on goods and services with a narrower sales tax.

Johnson kicked off his official campaign on Wednesday with a pledge to lead Britain out of the European Union on Oct. 31 and a warning to his divided Conservative Party that “delay means defeat”.

“After three years and two missed deadlines, we must leave the EU on October 31,” Johnson, 54, said then. “I am not aiming for a no-deal outcome.”

Johnson, whose unconventional style has helped him shrug off a series of scandals in the past, has won over much of his party by arguing that only he can rescue the Conservatives by delivering Brexit.

He argues that if Britain is prepared for a no-deal Brexit, the EU will bend to his argument to remove the so-called Northern Irish backstop to prevent a return to a hard border with Ireland if there is no agreed future trade deal.

Slideshow (3 Images)

But the EU has refused to renegotiate the Withdrawal Agreement reached with May last November and Ireland has said it is not willing to change the backstop.

On Wednesday, the European Commission said: “In light of the continued uncertainty in the United Kingdom ... and the overall domestic political situation, a ‘no-deal’ scenario on 1 November 2019 very much remains a possible - although undesirable - outcome.”

Additional reporting by David Milliken; Writing by Guy Faulconbridge and Elizabeth Piper; Editing by Stephen Addison and Janet Lawrence

Our Standards:The Thomson Reuters Trust Principles.

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