Congress opens impeachment proceedings against president

Opposition parties first filed a request to impeach Rousseff in September, accusing the unpopular president of violating Brazil's fiscal laws and manipulating government finances to help her win re-election last year.

Lower house speaker Eduardo Cunha finally said he had agreed to open proceedings.

A special committee with members from all parties will decide on the merits of the request, which needs two-thirds, or 342, of the votes in the lower house. She would then be suspended pending a 180-day trial by the Senate.

It is not clear if Rousseff's foes have the votes to remove her from office but the process could force further political wrangling and uncertainty, complicating her efforts to push austerity measures through Congress and encourage investment.

Brazil's political establishment is already close to paralysis due to an investigation into a massive graft scandal at state-run oil company Petrobras.

The $1.5 trillion economy, the largest in Latin America, is also expected to contract steeply this year and next in what could become Brazil's longest recession since the Great Depression of the 1930s.

In a televised address to the nation, Rousseff expressed her "outrage" at Cunha's decision and said there was no evidence of any wrongdoing by her.

"I do not have any accounts abroad," she said, in a dig at Cunha who is under investigation for graft and has bank accounts in Switzerland.

Rousseff is Brazil's most unpopular president in a generation and has faced mounting calls for her resignation for running the once-booming economy to a standstill. Recent opinion polls show that most Brazilians would like to see her impeached.

In Rio de Janeiro's upmarket neighborhood of Copacabana, residents reacted with disdain to Rousseff's televised address, banging pots and pans in their homes.

"This will be a sort of plebiscite in the country," Senator Jose Serra, of the main opposition PSDB party, said of the impeachment efforts.

Although Rousseff is not under investigation in the Petrobras scandal, much of the corruption happened when she was chair of its board. Her opponents say she should be held accountable.

Dozens of politicians, including Cunha, have been implicated in Brazil's biggest ever corruption investigation into a price-fixing and political kickback scheme at the state oil company.

Cunha, from the centrist Brazilian Democratic Movement Party (PMDB), a fractious partner in the governing coalition, is himself fighting for his political survival in the face of calls for his dismissal for taking bribes.

The lower house ethics committee is expected to open an investigation of Cunha next week with the backing of Rousseff's Workers' Party. That could lead to his ouster well before a presidential impeachment process can be concluded.

The Workers' Party plans to appeal to the Supreme Court to stop the impeachment proceedings, which are not expected to be put to a vote in the lower house before February and, if approved, take another six months in the Senate.

The Eurasia political risk consultancy said pro-impeachment forces do not have the two-thirds votes in Congress to oust Rousseff, and gave her a 60 percent chance of serving out her term. But some analysts believe the president is vulnerable.

"The chances of her opponents impeaching Rousseff are pretty good because she has lost a lot of allies," said David Fleischer, politics professor emeritus at the University of Brasilia.

Unemployment and high inflation are expected to worsen in the first half of next year as Brazil's recession deepens, which will create popular pressure and even street demonstrations to push Congress to impeach Rousseff, he said.

Government officials worry that plea bargain evidence from defendants in the Petrobras scandal could implicate Rousseff and ultimately fuel the case for impeachment.

Even if her opponents fail to muster enough votes to unseat Rousseff, their impeachment bid could not come at a worse time for her weakened government as it heightens political uncertainty and market volatility.

The proceedings will take over the agenda in Congress, leaving little room for fiscal austerity measures needed to balance Brazil's overdrawn accounts and avert the loss of its coveted investment grade credit rating.