Impeachment Proceedings Opened Against Brazil's President

By Lisandra Paraguassu and Anthony Boadle

(Reuters) -- The speaker of the lower house of Brazil's Congress opened impeachment proceedings against President Dilma Rousseff on Wednesday, deepening a political crisis as the economy nosedives.

Opposition parties 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 re-election last year.

Lower house speaker Eduardo Cunha said he had agreed to open proceedings. A special committee with members from all parties will decide on the merits of the request, which then needs two-thirds, or 342, of the votes of the chamber to suspend the president pending a 180-day trial by the Senate.

Brazil's political establishment is already close to paralysis due to an investigation into a massive graft scandal at state-run oil company Petrobras that has heightened political tensions and created gridlock in Brasilia.

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 not a grain of evidence or suspicion of any wrongdoings by her.

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

Rousseff, the most unpopular Brazilian president in a generation, has faced mounting calls for her resignation for running the once-booming Brazilian 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 comments, banging pots and pans in an effort to drown out her televised address.

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

Although Rousseff is not under investigation in the Petrobras scandal, much of the corruption happened when she was chairman of the board and 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 political survival in the face of calls for his dismissal for taking bribes.

But his power to start impeachment proceedings has given him a trump card against Rousseff and the governing coalition, which is splintering under the weight of the recession and Petrobras scandal.

The Eurasia political risk consultancy said pro-impeachment forces do not have the two-thirds votes in Congress to oust Rousseff, and gives 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.

(Additional reporting by Tatiana Ramil in Sao Paulo and Paulo Prada in Rio de Janeiro; Writing by Brad Haynes; Editing by Frances Kerry and Tom Brown)