December 28, 2016 / 3:11 PM / 7 months ago

Brazil's Temer to veto bill easing states' debt: official

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Brazil's President Michel Temer walks at Alvorada Palace after a breakfast news conference with journalists in Brasilia, Brazil, December 22, 2016.Adriano Machado

BRASILIA (Reuters) - Brazilian President Michel Temer will veto a bill that gives cash-strapped states a temporary pardon on their debts to the federal government, the president's chief of staff office said Wednesday.

The veto comes after the lower house of Congress last week surprised the Temer administration by scrapping a clause in the bill that forced states to take tough austerity measures in exchange for debt relief.

The government plans to work on a new bill to re-establish those measures, which include a freeze on wages and an increase in pension contributions, said a presidential aide who asked for anonymity to speak freely on the matter.

The changes passed in the lower house forbid the government from helping cash-strapped states such as this year's Olympics host Rio de Janeiro without breaking the fiscal responsibility law, said a source at the Finance Ministry.

"The government has its hands tied," said the ministry official, who asked for anonymity because he was not allowed to speak publicly. "The government is trying to find a solution to resolve this matter."

States like Rio de Janeiro have struggled to pay salaries for police, doctors and to keep hospitals stocked with medical supplies, provoking violent clashes between police and protesters enraged with the shortages.

Reporting by Maria Carolina Marcella; Writing by Alonso Soto; Editing by Janet Lawrence and Bill Trott

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