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Australia PM Rudd faces toughest week

(Agencies)
Updated: 2009-06-22 14:38

CANBERRA - Australia's Prime Minister Kevin Rudd is facing his biggest political crisis over the coming week with rivals demanding he resign over abuse of power accusations and parliament to reject a key election promise.

Rudd said on Monday that his center-left government had been targeted in a "farrago of lies" mounted by conservative opponents, who accused Rudd and Treasurer Wayne Swan of doing favors for a car dealer friend who was also a political donor.

Australian Prime Minister Kevin Rudd listens as his British counterpart Gordon Brown delivers his address to faith leaders, at St Paul's Cathedral in London in this March 31, 2009 file photo. [Agencies]

An email detailed in weekend newspapers appeared to back accusations that both Rudd and Swan misled parliament over government favors done for the car dealer to help him gain finance amid the global credit crunch.

"The problem is, no such email exists. It is false, it is fake, it is a forgery, notwithstanding the fact that that is the single piece of evidence," Rudd said, demanding conservative opposition leader Malcolm Turnbull resign or apologize.

As Turnbull called for both Rudd and Swan to quit, police raided the home of a Treasury department official as part of an inquiry into whether an email had been deliberately forged.

The email appeared to have been "concocted," but raised serious questions, conservative spokesman Joe Hockey told a special parliamentary session called to deal with the crisis.

The furor, while unlikely to force resignations, threatens to dent Rudd's stellar popularity and claims of clean government, with an instant television poll showing 75 percent of respondents doubted Rudd and Labor's version of events.

Despite coverage blanketing newspapers and television, the markets took no notice with few traders expecting either Rudd or Swan to fall victim to the crisis.

HEAT ON OVER CLIMATE

But an even bigger problem loomed for Rudd in the upper-house Senate, with a balance-of-power alliance of conservative and swing-vote senators pledging to reject Labor's promise of a carbon trade regime to help green the emissions-heavy economy.

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"It is absolutely crazy for Australia to go it alone," said independent Senator Steve Fielding, who said Labor's vaunted laws should be put aside until the completion of global climate talks in Copenhagen in December.

"You've got China, you've got India. We've got to wait till Copenhagen. We need to see what the rest of the world are going to do, and then Australia can respond, because frankly, going alone is suicide," Fielding said.

With Labor needing seven votes to get laws through the Senate and conservatives promising a filibuster to avoid a vote, Fielding's refusal meant the carbon regime faced certain defeat.

The only bright for Rudd was a conservative backflip on a revived budget bill on taxes on alcoholic soft drinks, which if defeated would have given Rudd a constitutional trigger to call early elections.

Opposition spokesman Peter Dutton said his side would reluctantly support the tax, which had already been rejected once by the Senate. A second rejection would have allowed Rudd to call a "double dissolution" election in both houses of parliament.