BRASILIA, Dec 14 (Reuters) - Brazil’s government proposed a bill on Wednesday allowing state governments to enter so-called “fiscal recovery”, suspending debt payments to the federal government in exchange for limiting certain forms of spending and pursuing privatizations.

Finance Minister Henrique Meirelles compared the proposal, which will be debated by Congress, to the bankruptcy protection available to companies, adding that states would have the option of participating under certain conditions. (Reporting by Marcela Ayres and Cesar Raizer; Writing by Bruno Federowski)