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Brazil's indicted Senate head removed by Supreme Court

Brazil's Senate President Renan Calheiros (L) and federal judge Sergio Moro attend a session at the Federal Senate in Brasilia, Brazil, December 1, 2016. REUTERS/Adriano Machado

By Anthony Boadle and Alonso Soto BRASILIA (Reuters) - Brazil's Supreme Court on Monday removed Senator Renan Calheiros as president of the Senate after the top court indicted him last week on charges of embezzlement, a court spokesman said. His replacement by Senator Jorge Vianna of the leftist Workers Party, who is opposed to spending cuts, could endanger efforts to control a widening budget deficit as a first step in restoring investor confidence in Latin America's largest economy mired in a two-year recession. The removal of Calheiros was a new blow for Brazil President Michel Temer whose government has been weakened by corruption scandals as it strives to push through unpopular austerity measures. Justice Marco Aurelio de Mello imposed an injunction against Calheiros based on a majority ruling by the high court last month that any person indicted for a crime could not be in the presidential line of succession. The head of the Senate is the second in line after the speaker of the lower house, as Brazil does not have a vice president at the moment. Calheiros can appeal to the full court, but in the meantime he has to immediately step down as Senate leader and hand over the position to the vice-president of the upper chamber, Senator Jorge Vianna, senate leaders said. Calheiros was indicted Dec. 1 on charges of misusing public funds in a nine-year-old case involving payment of child support for a daughter he had in an extramarital affair, including billing the Senate for car rentals with false contracts. Calheiros declined to comment on the court ruling until he was officially informed and could consult his lawyers, his office said in a statement. The change of leadership in the Senate comes at a crucial moment for Temer's efforts to pass austerity measures through Congress to restore fiscal discipline to Brazil's overdrawn government accounts. The government's leader in Congress, Romero Juca, said the removal of Calheiros would not alter plans for a Dec. 13 vote on a 20-year cap on federal spending, the key measure proposed by Temer to bring a widening budget deficit under control. But the change in leadership is expected to complicate the fiscal agenda and rattle investors who are looking for signs that Brazil is putting its books in order before they decide to invest in the country again. Brazil lost its investment-grade credit rating last year due to the fiscal deficit run up by the Workers Party government of impeached president Dilma Rousseff, who was replaced by Temer in May. "The injunction is terrible news for Temer because it puts the spending ceiling at risk given that the deputy leader of the Senate is from the Workers Party," said Leonardo Barreto, head of Brasilia-based political consultancy Factual. "This can delay the final vote and send the wrong signal to markets," he said. The fall of Calheiros was a question of time because he faces 11 corruption investigations, most of them related to the massive bribery and kickback scandal centred on state-run oil company Petrobras. The ousting of Calheiros was welcomed by some of his peers who were critical of his attempts to curtail the work of prosecutors in the Petrobras scandal. "It was deeply unsettling for all of us to have an indicted person as leader," said Senator Ricardo Ferraço of centrist PSDB party. "This is timely and will clean things up." (Additional reporting by Eduardo Simoes and Marcelo Teixeira in Sao Paulo; Editing by Richard Chang and Diane Craft)