By Alonso Soto

BRASILIA (Reuters) - The president of Brazil's Senate refused on Tuesday to accept a Supreme Court injunction removing him from office, pushing the country toward a constitutional crisis as it struggles to end political gridlock and an economic recession.

A judge on the top court on Monday ordered the removal of Senator Renan Calheiros because he was indicted last week for embezzlement, deepening conflict between the judiciary and the legislature over the prosecution of corrupt politicians.

But following a three-hour meeting on Tuesday, the leaders of Brazil's Senate published a letter refusing to enact the dismissal of Calheiros until the Supreme Court's plenary rules on it Wednesday.


Emerging from the meeting, Calheiros told reporters he would continue in the post and criticized the attempt to remove him just nine days before his mandate officially ends.

"Democracy, even in Brazil, doesn't deserve this," he said.

The constitutional rift threatens to delay key measures in President Michel Temer's efforts to restore fiscal discipline to Brazil in the midst of a two-year recession.

Brazilian markets seesawed over the decision to oust Calheiros because he would be replaced by leftist Senator Jorge Viana of the Workers Party, which opposes cuts in federal spending.

Viana backed the Senate decision to wait for a ruling by the plenary, but investors fear that if he took over he could delay the final vote in the Senate over a 20-year constitutional cap on federal spending. The cap is the centerpiece of Temer's plan to bring a widening budget deficit under control in Latin America's largest nation with the vote scheduled for Dec. 13.

In a year of political turmoil in Brazil, Calheiros' attempted ouster follows the removal of the former speaker of the lower house and the impeachment of former Workers Party President Dilma Rousseff.

Anger over cutbacks and attempts by lawmakers to shield themselves from prosecution has spilled onto the streets. Protesters in Brazilian cities on Sunday targeted Calheiros as a symbol of a corrupt political establishment.

In Rio de Janeiro on Tuesday, police used tear gas to disperse demonstrators outside the state assembly where lawmakers were voting austerity measures aimed at rescuing the state from a debilitating fiscal crisis.


Constitutional experts were divided on whether Justice Marco Aurelio de Mello had overstepped his jurisdiction by trying to oust Calheiros, but agreed he had sparked a constitutional crisis that tested Brazilian democracy.

"It was a hasty decision that set off a crisis between institutions," said constitutionalist Ives Gandra. "It should be up to the senators to remove a president of the Senate."

The Senate lodged an appeal with the Supreme Court on Tuesday to overturn the injunction but the full court is expected on Wednesday to uphold the decision based on a recent ruling favored by a majority of the court that no one indicted for a crime can be in the presidential line of succession.

The head of the Senate is the second in line after the speaker of the lower house, as Brazil does not have a vice president at the moment.

Brazil's currency fell as much as 1 percent in early trading, but later pared loses.

The benchmark Bovespa stock index fell 0.5 percent in early trade, but reversed and climbed higher after the Senate refusal was announced to close up 2 percent for the day.

(Additional reporting by Pedro Fonseca and Rodrigo Viga Gaier in Rio de Janeiro and Bruno Federowski and Eduardo Simoes in Sao Paulo; Writing by Brad Haynes and Anthony Boadle; Editing by Meredith Mazzilli and Alistair Bell)

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