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US-European showdown: watching and waiting over Wolfowitz

17 May 2007

Three days after release of the report of the ad hoc committee which found Wolfowitz guilty of grave ethical and governance violations, the board is still deliberating on a decision. The report investigating Bank president Wolfowitz’s improprieties in negotiating a pay rise and promotion for his partner, Shaha Ali Riza found him guilty as charged. Deadlock has since ensued at the World Bank between the US executive director and European-led constituencies.

While the US has largely been abandoned by its allies, the White House continues to dig its heels in and is refusing to concede. An exit strategy is now apparently under negotiation, with the US insisting that Paul Wolfowitz be able to resign with his name cleared of any wrong-doing. This would mean that the board would have to agree that Wolfowitz had acted in good faith, and that mistakes were made by all sides, in particular by the Ethics Committee.

The 300-page report by the ad hoc committee was released late on Monday 14 May. In particular the committee was troubled by “the absence of any acceptance by Mr. Wolfowitz himself of responsibility or blame for the events that transpired” … and what this implied for “the leadership the Bank could expect from the man who had been selected to head a global institution with the central mission of fighting poverty”. The group found that Wolfowitz’s submission to the ad hoc group on 11 May “evidences questionable judgement and a preoccupation with self interest over institutional best interest.”

Wolfowitz has few allies left either from within or outside the World Bank

In his response to the report presented to the board on Tuesday 15 May, which was carefully crafted by his lawyer Robert Bennet, Wolfowitz claims to have been the victim of unfair judgement and a smear campaign, and continued to assert that he did nothing wrong in relation to the Riza affair. Interestingly he then went on to acknowledge serious issues with his overall management at the Bank, including his over reliance on advisers that he brought in from the outside. He assured staff that he would make changes to his management to regain their trust. Compared to his public apology at the World Bank Spring meetings on 11 April, he seems now to be saying that his wrongdoing was not to do with one human resources case, but with several much more important problems to do with managing a large public institution.

Vote of no confidence

Wolfowitz has few allies left either from within or outside the World Bank. On Tuesday, a letter was signed by 37 of the 39 Bank’s country directors urging that the Board and the President reach a “swift and satisfactory conclusion”. They urged that the crisis “be resolved as quickly as possible and “in a way that demonstrates the Bank’s commitment to the highest standards of integrity and accountability”. In a Bloomberg news report, South African Finance Minister Trevor Manuel was quoted as saying that “there should be a parting of the ways … I think we must live with the decision by the executive board… It’s unfortunate, but c’est la vie.”

The Wolfowitz scandal, now in its sixth week, has also been accompanied by growing calls world wide for an end to the historical artifice which allows the US to choose the head of the Bank, while the Europeans pick the head of the Fund. An urgent recommendation for leadership selection reform, organised by the NGO coalition New Rules for Global Finance, was signed by 165 civil society representatives and sent to executive directors and alternates of the IMF and World Bank on 14 May. This backs up earlier calls that the World Bank end the inequality in decision making at the institution; and introduce full transparency based on a presumption of disclosure for all documents (including board meeting transcripts).

Wolfowitz has since cancelled a trip to Europe. On Thursday he was to have appeared at the World Bank’s annual conference on development economics, where ironically he was due to award a prize for an essay on anti-corruption. According to the news agency Reuters, Germany’s development minister Heidimarie Wieczorek-Zeul, who has repeatedly endorsed European calls for his resignation, said that he would not be welcome at a forum the Bank is holding in Berlin next week on development aid for Africa as part of Germany’s presidency of the G8.

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