Wolfowitz quits World Bank in face-saving deal

THE crisis at the World Bank has come to a dramatic end, via a face-saving agreement that does little to disguise the fact that the institution’s president is being forced from his job.

Facing damning charges of favouritism, Mr Paul Wolfowitz has been allowed to resign honourably, with effect from the end of next month, with the bank acknowledging he was not alone in making mistakes.

The decision was made four days after a special bank panel concluded that Mr Wolfowitz had violated his contract by breaking ethical and governing rules in arranging a pay and promotion package for girlfriend Shaha Ali Riza in 2005.

The agreement governing his exit was a price the bank’s 24-member executive board was prepared to pay to get him to step down.

The deal averts a rupture between the United States and its European allies, after the issue escalated into a row between both sides, with the Europeans pressing for Mr Wolfowitz’s departure and the Bush administration standing behind its man.

The arrangement leaves Mr Wolfowitz with greatly reduced powers during the remainder of his tenure, according to a source close to the negotiations.

He has agreed to not make any major decisions on policy or personnel matters and will not attend the Group of Eight finance ministers meeting this weekend

in Potsdam, Germany, the source said.

After playing hardball for weeks, Mr Wolfowitz accepted the compromise on Thursday, saying it was in the best interests of the board that its mission “be carried forward under new leadership”.

His resignation brought to a close weeks of uncertainty that saw pressure mounting from European countries and staff in revolt after the revelations of favouritism.

The announcement was greeted with jubilation in the bank as many employees clapped and hugged.

The appointment of one of the prime architects of the Iraq war to the bank’s top post had been controversial from the beginning, and Mr Wolfowitz’s management style and perceived favouritism towards the Bush administration had upset many staff.

President George W. Bush, who gave up the fight to defend him in the face of mounting opposition, praised Mr Wolfowitz at a news conference, saying he regretted “that it’s come to this”.

Now, a new battle may begin as the Bush administration gets ready to announce its candidate for the bank’s presidency, a post which is also coveted by European allies.

With the largest share of votes in the institution – the United States has 16 per cent – Mr Bush is still in pole position to continue America’s long tradition of appointing the World Bank president.

Among the possibilities on the list of successors are former Deputy Secretary of State Robert Zoellick and current Deputy Treasury Secretary Robert Kimmitt.

But as the Wolfowitz saga demonstrated, it is not going to be plain sailing for the Americans, with the US President weakened by the chaos in Iraq, low popularity and his lame duck status.

Meanwhile, the bank offered its current president the chance to make a graceful exit, saying: “We are grateful to Mr Wolfowitz for his service at the bank.

Much has been achieved in the last two years.”

The conciliatory tone and language appeared to upset several European representatives during intense negotiations over the past few days.

But they eventually accepted what they saw as a parting victory for him, having won the even larger prize of his ouster.

IN GOOD FAITH

“I acted ethically and in good faith in what I believed were the best interests of the institution, including protecting the rights of a valued staff member.”
MR WOLFOWITZ, accepting the compromise for him to step down

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