BRASILIA, Brazil - Brazilian President Luiz Inacio Lula da Silva apologized in a nationwide address Friday for a bribery and campaign finance scandal that threatens to wreck his government but he denied knowledge of any wrongdoing.
"The government and the (ruling) Workers' Party have to ask for forgiveness from the Brazilian people," he said in a short, solemn speech delivered from a podium at the presidential ranch.
The former factory worker and union leader said he felt "betrayed by unacceptable actions".
Allegations that Lula's ruling party used undeclared financing to pay campaign costs and bribe legislators have brought on Brazil's worst political crisis in a decade.
The speech followed further damaging revelations before a congressional investigation Thursday, when the advertising guru behind Lula's successful electoral campaign admitted he received undeclared money from the alleged middleman in the operation in an offshore bank account.
A poll Friday showed for the first time that Lula could lose the October 2006 presidential election because of the scandal.
Lula called in his speech for the reform of political financing rules that he has blamed for luring off-the-books money into the system.
"I'm conscious of the gravity of the political crisis. It hurts the entire party system," he said. "It is the duty of the government to stop the crisis from contaminating the economy."
The scandal, which broke out in June, centers on accusations that Lula's ruling Workers' Party bribed lawmakers to back legislation and used undeclared financing for 2002 election campaigns.
Initial reaction to the speech was mixed. Markets had weakened early Friday morning. The Bovespa stock index dropped at least 1.5 percent and the local currency fell as well. Lula's speech failed to perk them up.
Alexandre Mathias, chief economist with Unibanco Asset Management, said: "The president aligned himself with popular disgust over the allegations.
"Lula highlighted good economic indicators and made a sign of (policy) continuity, which is good for investors."
But Hideaki Iha, an analyst at Corretora Souza Barros brokerage said: "He didn't say anything. He said what he's said before and he doesn't have anything new to say. ... It's still early and isn't over yet."
Although several senior officials have resigned, Lula, who won the presidency of the world's fourth-largest democracy at his fourth attempt, has not so far been directly implicated.
Friday editions of Brazil's three main newspapers, Estado De S. Paulo, O Globo and Folha De S. Paulo quoted opposition lawmakers as saying they were considering launching an impeachment process against Lula.
The president of Congress's Lower House, Severino Cavalcanti, said however that such talk was premature.
The new poll, published by the Datafolha opinion research firm, said Lula would be defeated by Sao Paulo Mayor Jose Serra in a run-off vote should the opposition Social Democratic Party, or PSDB, politician choose to run.
Lula's popularity had fallen to its lowest-ever level, with a key loss of support among poor Brazilians who voted him into office on promises to clean up government, it showed.
Feeds