President Jose Sarney has laid off 60,000 government employees, frozen wages and prices and revamped the currency in a program of "national salvation" designed to combat 933 percent inflation.
"No democracy can be preserved in a situation of hyperinflation," he said in announcing the austerity program to the nation. "We need to summon our courage to make sure that we don't see blood and tears. To avoid that, we must rely on our sweat and sacrifice."Union leaders immediately threatened to call for a nationwide general strike to protest the measures, which eliminate a system that ties wage increases to inflation.
Sarney said banks would be closed Monday and Tuesday to give them time to adapt to the new measures, which include a 17 percent devaluation of the Cruzado and creation of the so-called "new cruzado" worth 1,000 old ones.
The program also scraps the automatic monthly indexing of contracts, savings accounts and most financial transactions to cost of living increases.