World Bank chief to quit under fire over ethics
May 18, 2007 - 10:38:14 AM

Washington, May 18 - World Bank President Paul Wolfowitz has said he would resign, capping weeks of bitter conflict at the aid lender over a pay raise he arranged for his girlfriend.

Wolfowitz Thursday said the 185-nation agency's mission should 'be carried forward under new leadership,' and he would step down June 30, according to a statement by the bank's board of directors. The board said it would start looking for a new president immediately.

The decision followed three days of marathon meetings to negotiate an exit for the co-architect of the Iraq war, after an internal report this week found that Wolfowitz broke ethics rules with a 2005 promotion for his companion, Shaha Riza.

The scandal was especially damaging because Wolfowitz, 63, made fighting corruption his signature policy, along with aid to Africa. He will withdraw less than halfway through his term.

In a carefully crafted statement, World Bank directors did not fault Wolfowitz and noted his insistence that he broke no ethics rules, praised his achievements and said that the episode showed that the bank's internal standards needed review.

'A number of mistakes were made by a number of individuals in handling the matter,' the statement said.

As Wolfowitz lost the support of a majority on the 24-member board, the White House accepted this week that he had to go. At the end, the former US deputy defence secretary fought only for the bank's board to clear his name.

'The poorest people of the world, especially in sub-Saharan Africa deserve the very best we can deliver,' Wolfowitz said Thursday. 'Now it is necessary to find a way to move forward.'

The uproar opened a rift between the US and the European countries seemingly intent on ousting Wolfowitz, who accused his foes of a smear campaign aimed at ousting him on trumped-up ethics charges.

A key planner of the US-led war in Iraq, Wolfowitz has been a polarizing figure at the bank since Bush nominated him in 2005 for a five-year term to lead its fight against poverty and disease.

'I regret that it's come to this,' Bush told reporters hours before Wolfowitz gave up. 'All I can tell you is I know that Paul Wolfowitz has an interest in what's best for the bank.'

Thursday's statement praised Wolfowitz for his efforts on debt relief, environmentally friendly investment, fighting disease and combatting graft.

Yet member governments had forced him to scale back the anti- corruption drive after some countries complained that penalties imposed by the bank were arbitrary.

He also angered World Bank staff by sidestepping senior managers with top aides brought in from the Bush administration. Wolfowitz's push to boost the bank's role in rebuilding Iraq prompted charges that he was doing Bush's bidding.

German Development Minister Heidemarie Wieczorek-Zeul, speaking for the European Union, said this week that she had little confidence that Wolfowitz could lead the drive to secure 30 billion dollars in new World Bank aid for the poorest nations for 2008-11.

The Wall Street Journal, a staunch supporter, has called the drive to oust him a 'European coup attempt' by rich-nation politicians and bureaucrats upset by his focus on corruption and on 'results' in development aid.

The US is the bank's largest contributor. Still, Washington commands only a 16.4 per cent share-holding, leaving it increasingly isolated as support for Wolfowitz ebbed among senior managers and the bank's staff association called for his removal.

At issue was a pay raise and promotion that Wolfowitz directed for Riza, three months after becoming bank president in June 2005. It boosted her annual salary by 36 per cent to 180,000 dollars and guaranteed yearly raises of 8 per cent.

Riza, 52, was loaned out to the US State Department to avoid a potential conflict of interest but was kept on the World Bank payroll.

A panel of seven World Bank directors found this week that Wolfowitz broke staff rules and his employment contract because the package was too generous and his involvement was a conflict of interest.

Wolfowitz is the first World Bank president to resign under a cloud since the bank was founded in 1944 to help Europe and Asia rebuild after World War II.

His exit revived debate about the tradition that the US chooses the bank's head and a European leads the International Monetary Fund.

Oxfam, a British-based aid group, said it was a chance to change that system and choose the next World Bank chief 'on merit through an open, accountable process.'

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