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Brazil downgrade leaves little choice but austerity for Rousseff

Brazil’s government scrambled yesterday to reassure investors it will impose austerity measures to put public finances in order after its credit rating was downgraded to junk status.

President Dilma Rousseff called an emergency cabinet meeting to brainstorm on policies to bridge a fiscal shortfall and how to win their approval by a Congress that has been reluctant to sign off on unpopular belt-tightening measures.

“The plan is to come up with something in the next couple of weeks that we can work on with Congress,” Finance Minister Joaquim Levy told journalists.

The Standard & Poor’s rating agency on Wednesday stripped Brazil of its hard-won investment grade rating, downgrading it to “junk” sooner than the government and investors had expected.

The downgrade appeared to strengthen Levy’s position. He has been the government’s face of austerity but his push for deeper spending cuts to improve Brazil’s finances and avoid a downgrade faced resistance inside the cabinet and Congress.

Read more: Unlike S&P, Fitch still sees elements supporting Brazil’s investment grade