MILAN: Brazil’s President Luiz Inacio Lula da Silva denies that Finance Minister Fernando Haddad is weakened after Congress refused to act on a provisional measure considered crucial for the country’s fiscal balance.

“Haddad will never be weakened as long as I am president because he is my finance minister, chosen by me and held by me,” Lula said last Saturday at a press conference in Italy.

Haddad had suffered a major blow last Tuesday when senate leader Rodrigo Pacheco swatted down a proposal to limit tax credits to cover the cost of an exemption from payroll levies, casting doubts about the minister’s ability to control fiscal deficits.

The plan drew severe backlash from Congress and industries that rely heavily on such credits. The setback has increased the chances that Haddad will have to scale back the government’s fiscal target for 2024.

Lula told journalists that the obligation to find a solution to compensate for the tax benefit lies with businessmen, not the government. If an exit isn’t found, payroll relief for 17 sectors and small town municipalities can be voided.

The market reacted negatively, and last Thursday Haddad waived a review of government spending.

 - Bloomberg