Brazil's President, Mr Fernando Cardoso, has told a state governor, who shook financial markets by declaring a debt moratorium this week, to get back into line and meet his state's obligations.

"The main authority of the country is the President," Mr Cardoso said, without mentioning the Minas Gerais Governor, Mr Itamar Franco, a bitter political rival, by name. Mr Cardoso's unexpected remarks came at the first cabinet session of his second term as president.

The confrontation was touched off on Wednesday when Mr Franco said his financially troubled state - one of the most important in Brazil - would halt payments for 90 days on its $15.4 billion (9.9 billion) of debts, including money owed to the central government.