Brazil's president has pledged to reform campaign financing
Brazil's President Luiz Inacio Lula da Silva has asked for forgiveness from the Brazilian people for a scandal that has engulfed his government.
He apologised on TV but said he did not know about the alleged corruption, including a cash-for-votes scheme in the Brazilian Congress.
He insisted that those responsible would be punished.
His Workers' Party came to power in 2002 pledging to represent a break with Brazil's traditional dirty politics.
"The government and the Workers' Party have to ask for forgiveness from the Brazilian people," he said in his televised speech to the nation.
And he called for reform to the rules governing campaign finances.
Lula's speech follows an admission by his 2002 presidential campaign manager, Duda Mendonca, that he failed to declare political funding from abroad.
Mr Mendonca said the money had come from the man at the heart of the corruption scandal Marcos Valerio.
Mr Valerio an advertising executive with lucrative federal government contracts who loaned millions of reais to the Workers' Party during the election campaign.
The money had not been used to fund the president's own campaign, Mr Mendonca insisted.
Financial markets hit
"I'm conscious of the gravity of the political crisis. It hurts the entire [political] party system," Lula said in his speech.
"It is the duty of the government to stop the crisis from contaminating the economy," he added.
Brazil's financial markets have been hit by the scandal.
On Friday, Brazil's real fell 2% against the dollar, a day after notching up a 3% drop - its biggest slide in 15 months.
The Bovespa stock market index fell a further 3%, following a 2% dip Thursday.
The corruption allegations - which centre on a cash-for-votes scheme in the Brazilian Congress - have gathered pace in the last 24 hours.
Mr Mendonca's revelations on Thursday brought the scandal to the president's door for the first time.
An opinion poll on Friday showed that President Lula's popularity was slipping, suggesting for the first time that he could face defeat in next year's election.
But while opposition parties are talking about impeachment, analysts say this remains unlikely.
Can President Lula be trusted to clean up corruption? Can he implement reform? Send us your comments using the form below.
I have followed Lula's presidency with interest. You have to realise that Brazilian politics is a quagmire of corruption and the economy a bastion of unfairness. He can't just come in and revolutionise the whole thing, yet he is evolving it. Brazil under Lula is going in the right direction and this is a credit to the man. He's trying to change the system from within and the longer he stays in power, the better Brazil will be for it in the future.
Barnaby, Reigate, UK
He is an integral part of this corruption. Why should we trust him now?
John Worthington, Porto Alegre, Brazil
I recently visit several places in Brazil and I was happy to see a beautiful and progressive cities. A good report card for the government. I believe the president Lula was not aware of the corruption and he will get to the bottom of this mess.
Norma Westurn, Dallas, TX, USA
Lula is part of a flawed system of government, which has already shown it's placidity in the face of scandal. If the best Lula can deliver is an apology, then he does not deserve the trust that so many seem to place in him. In any case, it is time for another, more aware leader to take up the torch and try to restore accountability in the nation.
Giorgio Mariani, Rome, Italy
Lula is "disappointed", but not as much as the Brazilian people, who believed his party was the only honest one. Now it is clear that no party is honest. The whole political system is geared to stealing public money, and to guarantee immunity. It needs to be completely reformed, from the bottom up. Only then can this country realize its vast potential.
Martin Riordan, Santa Rosa, RS, Brazil
Let us not forget even in such troubled times that the crimes the Workers' Party have committed have been standard procedure in Brazilian politics for decades. Now we see the opposition, hungry for power, trying to tear the current government to pieces, perhaps in the hope of picking up the remains.
Fabio Coelho, Curitiba, Brazil
His apologizing is a strategy to be re-elected only. I voted for him, but am very disappointed in him. Besides, he says he was not aware of what was going on. If that is true it means he should have paid more attention to his peers. However, if that is not true, which we do believe is the case, he took part in the bribery as well.
Ana, Brasilia, DF
President Lula is struggling against corruption, but in Brazil, as in many others South American countries, is hard to tackle with this cancer that has become a really big problem. I think that President Lula is working hard to eliminate corruption and I'm sure that he's going to win the next elections.
Nelson Barrios, Caracas, Venezuela
The day I arrived in Brazil this scandal started to receive front page headlines, and throughout this process, I have observed the frustration and anger that the Brazilian people currently feel. I hope they are able to transform their nation, and to create a political system that honestly works towards improving the quality of life for all Brazilians.
Devin Meyers, Belo Horizonte, Brazil
Lula represents hope for Brazil. He is a visionary and has worked to tighten the gap between the corrupt wealthy and the millions of poor Brazilian citizens. In his vision he has found so many obstacles. He needs support and cooperation from all sides. I believe in Lula's goodwill and push for reform but like all visionaries he needs the people to understand and support him. Give Lula a chance and he will prove it.
Kurt Farrugia, Malta
Which one is worse? That a President did not know anything about the dealings of his own party (which he is a co-founder), the dealings of his chief of staff and everything else happening at his doorstep, or that he knew everything? Either way in my book, that is not a President.
Jose Cardoso, San Francisco, Ca
The question is not about whether President Lula can be trusted or not. The scandal has reached such heights that there's nothing else this government can do; there is no more room to manoeuvre; the government has lost its ground to curb corruption, or to implement reforms, or to decide anything at all. President Lula has lost the leadership of the country.
Carlos Eduardo Chigres, Sao Paulo, Brazil
The current scandals prove once again that corruption in Brazil cannot be dealt with using current practices and laws. Until people involved in corruption scandals get heavy prison sentences, and actually go to jail for a long time, this will never end.
I do not believe in Lula anymore and I think this is the beginning of a series of scandals. It is a shame for all those Brazilians who believe in Lula.
Jatniel Sangronis, Venezuela, Ciudad Ojeda
President Lula absolutely must do all he can to reclaim the trust of the people. He (and the entire PT) had my support in 2002, but unless he takes drastic action soon, he will lose my, and the whole world's, support at re-election time and he will likely lose his job. It's time to take action now, Senhor Presidente!
Russ, Seattle, USA
Yes, President Lula can be counted on to clean up the current corruption in campaign financing and institute some reforms. Of course, these reforms may not have a permanent effect. With President Lula in power, it seems likely that sincere attempts will be made to overcome this tendency. The question is, how long will this last?
H L Daneman, Santa Fe, NM USA
It is rare when a politician apologises to the people and asks forgiveness. Maybe the electorate should hold off on making a judgement to see if President Lula takes the path of hiding and covering up, or promoting clear and open investigations into this scandal. Brazil is a poor country in need of economic reform with protection for the rain forest. This problem has wider implications for the world at large.
Cliff Taylor, London, UK
Corruption in Brazil is not any different from corruption anywhere else in the world, it's just less subtle. In the US it's called lobbying, made legal, and has a much greater impact on our lives. As to implementation of reforms, do you believe campaign finance reform has done anything in the US? Lula so far seems to have improved the overall conditions in Brazil within the situation limitations.
Vantuil Varges, Ga, USA
I was never a supporter of the PT or Lula, and haven't even voted for them, but I believe that Lula was indeed unaware of the corruption that infected his government. It is now time for him to decide whether or not he will push for a purge in his party, and let the guilty ones take the fall, thus probably sacrifice internal support and his re-election. Or pretend he still knows nothing and let the entire boat sink with him onboard.
Felipe Meneguzzi, Porto Alegre, Brazil
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