Brazil's President Michel Temer caught in hush money scandal

Brazilian President Michel Temer takes part in the "A Year of Achievements" meeting in celebration of the first year of his presidential term, at the Palacio do Planalto in Brasilia, Brazil, on May 12, 2017. (Photo by AFP)

Brazil's President Michel Temer has reeled from a report that he authorized payment of hush money to a jailed politician in a scandal threatening to plunge Latin America's biggest country into political meltdown.

Demands for his impeachment and new elections sprang up overnight from opposition lawmakers, while small crowds appeared in Sao Paulo and Brasilia shouting: "Temer out."

In another blow for the veteran leader of the center-right PMDB party, his key ally Senator Aecio Neves from the PSDB party was targeted by anti-graft police early Thursday.

Officers could be seen entering Neves' properties in Rio de Janeiro and elsewhere. Local media reported that the Supreme Court had suspended him from office and was to rule on a request from the prosecutor general for his arrest.

This photo taken on August 31, 2016 shows Brazilian President Michel Temer (L) speaks with senator Aecio Neves in Brasilia. (Photo by AFP)

Temer faces two problems; the first is his own political survival and the second is the survival of ambitious austerity reforms, which he says are needed to whip Brazil's floundering, bloated economy back into shape.

His office said he would be spending Thursday in back-to-back meetings with party leaders, likely in an attempt to shore up his base in Congress, where he has solid backing despite being deeply unpopular with the public.

Temer, who took over after the impeachment last year of Dilma Rousseff, was reported late Wednesday by O Globo newspaper to have been secretly recorded agreeing to payments of hush money to Eduardo Cunha, the disgraced former speaker of the lower house of Congress.

According to the report -- which Temer immediately denied -- the president discussed the matter with Joesley Batista, an executive from the meatpacking giant JBS, on March 7.

Batista told Temer that he was paying money to make sure that Cunha -- thought to have encyclopedic knowledge of Brazil's notoriously dirty political world -- would keep quiet while serving his sentence for taking bribes.

Globo did not say how it got the information about the recording, which it said was offered in a plea bargain between Batista and his brother Wesley with prosecutors. The columnist who reported the bombshell claims clarified on Thursday that he had not personally heard the recording but had had it described to him "in the most detail possible."

The scandal is the latest shockwave from the "Car Wash" graft probe ripping through Brazilian politics.