World Bank chief responds to attacks on him: I’m not quitting

Top panel chastises Wolfowitz, stressing the need for high internal standards.

A DEFIANT World Bank president Paul Wolfowitz dug in his heels over a favouritism scam, declaring on Sunday that he would not resign despite a public dressing-down by European ministers and senior bank officials.

In a strongly worded communique, a high-level steering committee delivered an unprecedented attack that deepened uncertainty over Mr Wolfowitz’s future and threw into even greater doubt his ability to lead the institution.

“The current situation is of great concern to all of us,” the committee, which oversees both the bank and the International Monetary Fund, noted.

“We have to ensure that the bank can effectively carry out its mandate and maintain its credibility and reputation as well as the motivation of its staff. We expect the bank to adhere to a high standard of internal governance.”

That statement was hardly the vote of confidence Mr Wolfowitz needed following last week’s revolt by World Bank staff, who demanded his resignation over allegations that he played a direct role in granting a hefty pay rise and promotion to his Libyan-born girlfriend, who worked in the bank.

The former US deputy secretary of defence continued to put up a front of bravado.

He told a news conference after the release of the communique: “Look, I believe in the mission of this organisation, and I believe I can carry it out.”

He said a decision on the controversy should be left to the bank’s board of member countries.

“We need to work our way through this,” he said. “The board is looking into the matter and we’ll let them complete their work.”

If the steering committee has delivered a stinging indictment of Mr Wolfowitz, the bank’s executive board is likely to further undercut his credibility to run the organisation when it delivers its recommendations.

Giving a glimpse of what to expect in its final report – which some speculate could be out in a week – the 24-member board released incriminating documents last Friday that gave him less room to manoeuvre.

The board acts as a kind of legislature setting policies as a counterweight to the president. In some ways, Mr Wolfowitz’s last two years in office have resembled a tug-of-war between two branches of government.

The board usually decides matters by consensus, but its power centres are the United States, Japan and Europe, the largest donors to its programmes. European members are likely to play a key role in determining whether Mr Wolfowitz keeps his job.

They have long had doubts about his suitability to be bank president and have clashed with him over his emphasis on rooting out corruption in developing countries and holding up loans for countries with poor governance records.

Mr Wolfowitz’s defiance on Sunday might well further convince European donors like Britain, France and Germany that he needed to step aside for the good of the bank.

But voting power is based on shares in the bank.

The US, with 16 per cent, has the largest share, making it customary for the White House to nominate the bank president. It also means it is imperative that the major donor countries consult President George W. Bush if there is a decision to remove Mr Wolfowitz.

US support, however, is not assured. Despite its public backing for the beleaguered bank chief, Washington surprisingly went along with the communique criticising him.

The thinking among bank officials and analysts is that the board and the world’s finance ministers are unlikely to force him out in a putsch. What is likely to happen is that they would issue a strong reprimand over his involvement in the scam.

That would tear apart his credibility further and leave him no option but to quit.

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