July 22, 2005 - 3:05 AM

Brazil's Lula ends reshuffle amid scandal

By Andrew Hay

BRASILIA, Brazil (Reuters) - Brazilian President Luiz Inacio Lula da Silva made the final moves in a cabinet reshuffle on Thursday to shore up crumbling support in Congress as a bribes-for-votes scandal rocked his government.

With the last two changes, Lula has now reshuffled 10 ministers since June 6 to defend his administration from accusations in Congress the ruling Workers Party (PT) bribed lawmakers to back government legislation.

"The team put together now, that team is there until the end of my mandate," Lula said as he signed in new ministers.

Former ministers have retaken posts as lawmakers and Lula has given extra cabinet jobs to allied parties to salvage his Congressional coalition 16 months before he faces reelection.

Congress has launched 3 anti-corruption inquiries in the last six weeks linked to the PT and government. Lula vowed to build better relations with Congress and appealed for "seriousness" in investigations, where some lawmakers have implicated him in wrongdoing.

Proof of alleged bribes to lawmakers has yet to appear and Lula has denied knowledge of any such scheme.

Allegations of PT and government corruption have sparked Brazil's worst political crisis in over a decade and paralyzed Lula's legislative agenda.

Markets fear Lula may loosen fiscal and monetary controls to win back support or become a lame duck president and be replaced by a less market friendly leader.

The president's popularity remains high but polls show many Brazilians believe it could be eroded by an avalanche of corruption accusations against the PT, the party he helped found 25 years ago.

Five ruling party leaders have stepped down after being accused of involvement in the alleged bribery scheme and Lula has distanced himself from them.

He has now cut by half the number of ruling party ministers in his cabinet since he took office in 2003.

"It's a reform to improve support for the government, to defend the government," said political analyst Carlos Lopes at consultants Santafe Ideias in Brasilia.

As part of Tuesday's moves, the government-allied Progressive Party PP) won its first ministry as Cities Minister Olivio Dutra of the PT was replaced by Marcio Fortes, executive secretary at the trade ministry.

With the reshuffle, Lula increased the number of PMDB cabinet seats to three from two to boost support from his biggest congressional ally.

Government communications chief Luiz Gushiken, who has faced corruption allegations, will have most of his duties transferred to presidential secretary Luiz Dulci, Lula said.

Lula also announced he would cut the 21,000 politically appointed positions in the federal government by nearly 70 percent. The jobs, linked to corruption at state firms, will be opened up to competition from applicants.