Brazil's President Michel Temer is reeling 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.

Temer, 76, now faces two immediate problems.

The first is his own political survival and the second 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.

According to the account, Temer told Batista: "You need to keep doing that, OK?"

Temer's office issued a statement saying: "President Michel Temer never solicited payments to obtain the silence of former deputy Eduardo Cunha."

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."

'Car Wash'

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

Investigators have uncovered a massive scheme in which politicians took bribes in exchange for getting big businesses over-inflated contracts with state oil company Petrobras. The bribery and embezzlement then rippled far beyond, pulling in many of the country's most famous executives and leaders.

Former president Luiz Inacio Lula da Silva, a leftist icon for many in Latin America, faces five corruption trials, while a third of the Senate and a third of Temer's own cabinet are under investigation.

Until now Temer has managed to stay above the fray.

Although alleged to have participated in large-scale bribery deals, he cannot be prosecuted for crimes prior to his mandate. The Globo revelations, if confirmed, would leave him far more vulnerable.

Even before the latest crisis, Temer was mired in controversy.

Rousseff and her leftist allies accuse him of having engineered her impeachment and his own rise to power last year in what they say amounted to a coup d'etat.

Rousseff, from the leftist Workers' Party, was found guilty by Congress of having illegally manipulated government accounts to hide the true extent of Brazil's financial woes. However, many of her accusers in Congress — especially Cunha, who is also from the PMDB — faced their own ethical and legal problems.

Despite getting the top job, Temer has since struggled against repeated jibes that he lacks legitimacy.

However, he dismisses his rock bottom popularity ratings, saying that as an unpopular president due to rule only until the next scheduled elections in October 2018 he is free to push ahead with the painful austerity reforms the country needs.

By AFP's Eugenia Logiuratto and Damian Wroclavsky in Brasília.