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Brazil spending cap debated in Senate, left seeks referendum

BRASILIA (Reuters) - Brazil’s ruling party urged senators on Tuesday to back a constitutional amendment that caps federal spending for 20 years and reject an opposition request that it be put to a national referendum, which would delay its approval until next year.

Brazilian President Michel Temer speaks at a joint news conference with Japan's Prime Minister Shinzo Abe at Abe's official residence in Tokyo, Japan, October 19, 2016. REUTERS/Kim Kyung-Hoon

The flagship measure in President Michel Temer’s effort to restore Brazil’s fiscal discipline cleared the lower house of Congress last week and the government is confident it can win Senate approval by mid-December.

But leftist senators are demanding more debate on the austerity measure and have included a clause providing for a referendum before it can be put into effect. Any changes to the proposal would require approval in the lower chamber, making it all but impossible to pass this year.

Senator Eunicio Oliveira, Senate leader for Temer’s Brazilian Democratic Movement Party, said Brazil was running out of time to put its books in order and urged that the legislation be approved without changes.

“I am all for debate, but we must stick to the calendar,” Oliveira told reporters after reading the proposal to the standing committee on the constitution and justice, which will vote on the measure on Nov. 9.

Two rounds of voting in the full Senate are scheduled for Nov. 29 and Dec. 13. The government enjoys a majority and expects to repeat its victory in the lower house, where the cap passed by a comfortable 359-116 margin.

Oliveira told Reuters that the opposition, led by the recently ousted Workers Party, were adopting delaying tactics. “They know they can’t win so they are trying to delay,” he said.

Workers Party Senator Gleisi Hoffmann, who proposed the national referendum on Monday, accused the government of stifling debate and rushing the legislation through because it does not want to discuss unpopular spending cuts.

The constitutional amendment would limit the growth of public spending each year for two decades to the rate of inflation of the previous 12 months, though it can be revised after 10 years. To make it more palatable to Brazilians, cuts to spending on education and health were put off until 2018.

The measure is aimed at plugging a budget deficit that ballooned to more than 10 percent of gross domestic product last year, costing Brazil its investment grade credit rating.

Reporting by Anthony Boadle and Maria Carolina Marcello; Editing by Alistair Bell