Wolfowitz steps down as World Bank president

Wolfowitz steps down as World Bank president
By Krishna Guha and Eoin Callan in Washington
Copyright The Financial Times Limited 2007
Published: May 17 2007 23:12 | Last updated: May 18 2007 08:14

Paul Wolfowitz announced his resignation as president of the World Bank on Thursday night, ending a turbulent two-year tenure as chief of the world’s leading development institution.

In a statement, Mr Wolfowitz said: “It is in the best interests of those whom this institution serves for that mission to be carried forward under new leadership.” His resignation will be effective June 30.

Mr Wolfowitz’s departure in good health is unprecedented in the history of the World Bank and marks what may be an enduring shift in the balance of power at the institution, which has hitherto been dominated by the US and the president it nominates.

His resignation followed the publication on Monday of a devastating report into his handling of a secondment package for Shaha Riza, a bank official with whom he was romantically involved.

After a last-ditch diplomatic effort to save Mr Wolfowitz’s job, the US administration yielded to pressure from European and other shareholder governments that insisted he could not continue in his post. But the US insisted that the board exonerate him of the ethics charges first.

After several days of haggling, in which the UK acted as an intermediary, board representatives reluctantly agreed to accept Mr Wolfowitz’s assurance that he acted “ethically and in good faith in what he thought were the best interests of the institution.”

The board said “at the same time it is clear from this material a number of mistakes were made by a number of individuals in handling the matter under consideration, and that the bank’s systems did not prove robust to the strain.”

It endorsed the report’s call for a review of the governance framework of the bank.

The board paid tribute to Mr Wolfwitz’s service at the bank, noting “much has been achieved in the last two years.” It added: “It is regrettable that these achievements have been overshadowed by recent events.”

Mr Wolfowitz said: “I am pleased that after reviewing all the evidence the executive directors of the World Bank group have accepted my assurance that I acted ethically and in good faith.”

He promised that the next head of the World Bank would have his full support.

One person close to the board said: “It was obvious what the deal was. He would go but we had to accept his assurance that he acted in good faith.”

“Read what we said carefully,” the board insider added.

Some members of the bank’s staff were outraged by what they saw as a “whitewash” of Mr Wolfowitz. One bank insider said: “It is terrible – but I guess that was the price to pay to get him out.”

Tony Fratto, White House spokesman, said Mr Wolfowitz was a “good man who is passionate about the plight of poor people.”

He said: “We would have preferred that he stay at the bank.” Mr Fratto said President George W Bush will nominate a successor to Mr Wolfowitz “soon”.

Staff members – some of whom have agitated for Mr Wolfowitz’s removal – expressed alarm at the prospect of him remaining in post until June 30. They said it would be a recipe for continued internal strife at the bank.

The board is set to reconvene on Friday to discuss arrangements for the period to June 30, with many directors determined to ensure that responsibility for the operations of the bank is effectively transferred to another bank official during the period that Mr Wolfowitz remains formally in office.