By Lisandra Paraguassu
BRASILIA (Reuters) - President Michel Temer vowed on Thursday to slash credit card interest rates, offer subsidies to companies that retain employees and ease the hiring of workers on temporary contracts in his latest bid to lift Brazil out of a prolonged recession.
Temer also said the government will allow some workers to draw on severance fund accounts, known as FGTS, a step which could inject up to 30 billion reais ($8.98 billion) into the economy.
The president last week announced other moves to boost credit, as Brazil tries to combat a two-year-old recession and 11.8 percent unemployment.
Temer's seven-month-old government, which has been buffeted by corruption scandals, has seen its unpopularity increase.
"They are clearly trying to fight the negative agenda," said Alessandra Ribeiro, an economist with Tendências Consultoria. "But the effect for his popularity could be marginal because the impact of the measures will not appear in the short term."
In laying out the latest economic measures, Eliseu Padilha, Temer's chief of staff, said subsidies to companies that reduce working hours instead of firing employees could preserve 200,000 jobs over the next four years.
The government also said it would send a bill to Congress to ease the hiring of workers on a temporary basis.
Roberto Setubal, chief executive officer of Itaú Unibanco Holding SA, the largest Brazilian private bank, said the changes to the labor law will "certainly generate jobs, allowing negotiation of working conditions according to the economic sector."
Temer said interest rates on revolving credit cards of up to 30 days would be cut by more than half. For longer periods, banks would allow consumers to pay their debt in installments with reduced rates compared with today.
Brazilian interest rates are among the world's highest, with credit cards charging more than 400 percent a year.
Credit card industry association Abecs said it expected a drop in default rates following the changes.
Regarding the severance funds, workers will be allowed to withdraw all the money from their FGTS accounts if they are inactive for more than three years. Under current law, FGTS money can only be accessed if a worker is fired, retires or acquires property.
($1 = 3.3360 reais)
(Reporting by Lisandra Paraguassu and Alonso Soto; Writing by Silvio Cascione; Editing by W Simon and Leslie Adler)