Philippine church gives Arroyo breathing space

MANILA (Reuters) - The powerful Philippine Catholic church stopped short on Tuesday of calling for the resignation of President Gloria Macapagal Arroyo over a kickbacks scandal, but urged her to allow officials to assist corruption inquiries.

The reprieve comes as a shot in the arm for Arroyo, who would have faced mounting public outrage if the church had called on her to quit.

Nevertheless, the Catholic Bishops Conference of the Philippines, the umbrella body of church organizations, issued a strong statement after an emergency meeting to discuss the scandal.

"We strongly condemn the continuing culture of corruption from the top to the bottom of our social and political ladder," the bishops said after a day-long meeting.

"We ask the president to allow her subordinates to reveal any corrupt acts without being obstructed in their testimony no matter who is involved."

Earlier in the day, iconic former President Corazon Aquino said Arroyo had lost the moral right to remain in office and should quit.

The comments by Aquino, who took over after the ouster of strongman Ferdinand Marcos in the 1986 "People Power" revolution, were a blow for Arroyo but should not materially affect her position.

Aquino has called for Arroyo's resignation before, over charges of cheating in the 2004 presidential elections, but the president was not affected.

"Our guiding light should not be an obsession to evict the president," Aquino said in a speech to the influential Makati Business Club of local industry leaders.

"But in an environment where abuse of power closes all doors of legitimate redress, sadly we are too often pushed to the brink. That is why the most noble -- and least disruptive -- way out of the moral crisis would be for the president to resign.

"These critical times call for strong moral leadership, which clearly she is no longer in a position to provide."

Allegations of $130 million worth of kickbacks in a $329 million government telecoms deal with China's ZTE Corp. have bedeviled Arroyo for the past few months, and her husband has been named by witnesses testifying at a Senate inquiry into the deal.

But Arroyo has already survived three impeachment bids and at least three coup plots and has vowed to see out her final term, which ends in 2010.

Political analysts say she will likely do so because the church has not come out directly against her and she enjoys the support of the military and the lower house of Congress.

Arroyo has cancelled the ZTE deal and said on Tuesday that inquiries by the Ombudsman and the Department of Justice into the kickbacks allegations should be open so that the public could judge what was happening.

"This is the new people power, vigilance in the process of law to ferret out the whole truth," she said in her televised comments.

(Reporting by Raju Gopalakrishnan; Editing by Alex Richardson)