Pope grants waiver for ex-bishop to lead Paraguay

Paraguay's President-elect Fernando Lugo applauds during the inauguration of the country's largest farming and commercial fair in Mariano Roque Alonso near Asuncion July 12, 2008.

ASUNCION (Reuters) - Pope Benedict granted Paraguay's president-elect a historic waiver to allow the former bishop to take office next month without violating church rules, a Vatican representative said on Wednesday.

The Pope gave Fernando Lugo a special dispensation, downgrading him to layman's status, said Orlando Antonini, the Vatican's ambassador to Asuncion.

Lugo was elected president in April, ending more than 60 years of one-party rule in the poor South American country notorious for corruption and contraband.

"It's the first time this is granted. It was accepted because the people have chosen him and ... because his clerical status is incompatible with serving as president," Antonini told a news conference.

"The Pope has granted him the loss of his clerical status ... he's a layman now," Antonini said after meeting with Lugo.

For more than 10 years Lugo served as Roman Catholic bishop in the impoverished region of San Pedro, but the bearded and bespectacled clergyman shed his cassock in late 2006 to launch his political career.

He had asked that the Vatican grant him layman's status so he could run for president at the head of a center-left coalition. The Holy See rejected this initially and suspended him as bishop instead.

Antonini said Lugo could only become a priest again with a special papal authorization.

"He's not outside the church, only the church hierarchy, and that's what he had sought," Antonini said.

Lugo will assume the presidency on August 15.

(Writing by Hilary Burke; Editing by Stacey Joyce)