By Karolos Grohmann
LAUSANNE, Switzerland (Reuters) - The International Olympic Committee (IOC) is confident next year's Games in Rio de Janeiro will not be compromised by the political turmoil and economic downturn in Brazil, although preparations have "inevitably" been affected.
The Rio Olympics have been plagued by delays for years but the situation is improving, the IOC said on Wednesday.
The IOC also said it had set up a working group to look at savings in the runup to the Games as the ruling body and organizers look to tackle costs amid a deteriorating financial climate.
As preparations go into the final stretch there is also political upheaval with Brazilian President Dilma Rousseff facing impeachment.
"It will inevitably affect the Games," IOC Vice President Craig Reedie told reporters when asked if Brazil's situation had any impact on preparations.
"There are challenges," he said after Rio Games organizers delivered a progress report at the IOC Executive board meeting.
Opposition politicians launched the impeachment process against Rousseff last week for allegedly breaking Brazil's budget laws. The Supreme Court suspended proceedings on Wednesday pending a decision on its constitutional validity.
Political wrangling over the impeachment could drag on for at least six months at a time when the government faces legislative gridlock, the deepest recession in three decades and a corruption scandal at state-run oil company Petroleo Brasileiro SA.
Police investigating the alleged corruption around Petrobras also plan to probe more than $10 billion of construction contracts for the Olympics in Rio.
The current situation is in stark contrast to when Rio was awarded the Games in 2009 when Brazil was enjoying an economic boom.
Reedie, however, said progress had been made towards getting South America's first Olympics ready on time.
"There has been a massive improvement of the situation in the past months. That is good news," he said.
"Now you have to deliver the services levels that athletes and international federations expect and they (Brazil) have political and economic difficulties. We have come a very long way. We have to have total confidence," he said.
The new working group, which will operate for the next two months, will look to find ways to lift the financial strain on organizers, finding ways to save money.
"We will be looking for that fat," IOC's Games Executive Director General Christophe Dubi told reporters. "Everywhere we can make savings we will make savings."
Rio Games chief Carlos Nuzman said the overall situation was presented to the IOC in a transparent way.
"We did not try to escape (from the facts). The most important thing is that nothing affects the athletes and the organization of the Games," he said.
"We need to adjust everything," Nuzman said. "But that is normal. All the (Olympic) cities go through that, they all have to adjust everything. The most important thing is to deliver great Games."
(Reporting by Karolos Grohmann; Editing by Angus MacSwan and Ed Osmond)