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Brazil court says Rio governor should step down over campaign financing

RIO DE JANEIRO (Reuters) - An electoral court in Rio de Janeiro on Wednesday ordered Rio de Janeiro state governor Luiz Fernando Pezão and his deputy to stand down, accusing them of offering state contracts to attract financing for a 2014 reelection campaign.

The court said in a statement that the order would not take effect until Pezão and Vice-Governor Francisco Dornelles had exhausted the appeals process, something likely to take some time in Brazil's complex judicial system.

Press aides to the governor said that the men would appeal the decision, which comes as Rio de Janeiro state is struggling with a budgetary crisis triggered by a collapse in oil prices and Brazil's deepest recession in decades.

The court ruled that Pezão's administration had awarded sizeable state contracts to companies that contributed generously to his campaign to win a new four-year term.

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Rio de Janeiro state is home to much of Brazil's offshore oil industry. The state payroll expanded sharply during the country's commodities-fuelled boom earlier this decade, wrecking state finances when oil prices collapsed.

Last week, the state reached an agreement with the federal government to ease the debt burden of the cash-strapped state. In exchange for the deal, Pezão committed to the implementation of a series of austerity measures and now faces the challenge of pushing them through a hostile state congress.

(Reporting by Rodrigo Viga Gaia; Writing by Ana Mano; Editing by Daniel Flynn and James Dalgleish)