EFTA Document EFTA01377535

The ex-president's activities were legal, a spokesman from Lula's foundation, known as Instituto Lula, said by phone Thursday, asking not to be named citing internal rules. The institute later wrote in a statement that Lula was surprised by news of the investigation, which it called unjustified. At least one political leader wasn't caught by total surprise on Thursday, as lower house President Eduardo Cunha earlier in the day forecast the country's political crisis would worsen. He was referring to predictions that his own troubles would grow, and was right: a state's witness accused him of accepting a bribe. Cunha denied the allegations Thursday, saying the government may have pressured the informer to lie. "The strain of the political crisis coupled with the economic crisis is eroding the government's popularity and, as a consequence, it's losing its ability to govern," he said before the informer's charges were made public. The administration has suffered a series of defeats in Congress over the past month as lawmakers frustrate its efforts to contain spending and raise taxes. Legislators have opposed Rousseff by approving wage increases for judiciary workers and higher pensions for younger retirees. The probe into Lula could further damage the administration by making it harder for the ex-president to provide it with political support, Rafael Cortez, political analyst at research company Tendencias, said by phone. "This is one more factor of political destabilization," Cortez said. For Related News and Information: Bond Traders Lose Confidence in Brazil as Rousseff Is Besieged Brazilian Political crisis to worsen, Head of Lower House Says Brazil Congress Defies Rousseff by Boosting Pension Payments Top Latin American News: TOP LAT <GO> world Currency values: wCV <GO> Emerging-market Markets: EMMV <GO> --with assistance from David Biller in Rio de Janeiro and Mario Sergio Lima and Arnaldo Galvao in Brasilia Newsroom. To contact the reporter on this stor Anna Edgerton in Brasilia at responsible for t Andre Soliani at or Randal l Robert Jameson or To contact the editors T- his communication may contain confidential and/or privileged information. If you are not the intended recipient (or have received this communication in error) please notify the sender immediately and destroy this communication. Any unauthorized copying, disclosure or distribution of the material in this communication is strictly forbidden. Deutsche Bank does not render legal or tax advice, and the information contained in this communication should not be regarded as such. CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0074526 CONFIDENTIAL SDNY_GM_00220710 EFTA01377535