Deal is offered for chief's exit at World Bank

Posted in United States | 08-May-07 | Author: Steven Weisman| Source: International Herald Tribune

Paul Wolfowitz, the beleaguered president of the World Bank.

WASHINGTON: Leading governments of Europe, mounting a new campaign to push Paul Wolfowitz from his job as World Bank president, signaled Monday that they were willing to let the United States choose the bank's next chief, but only if Wolfowitz stepped down soon, European officials said.

European officials had previously indicated that they wanted to end the tradition of the United States picking the World Bank leader. But now the officials are hoping to enlist American help in persuading Wolfowitz to resign voluntarily, rather than be rebuked or ousted.

The goal, they said, is to avert a public rupture of the bank board over a vote, possibly later this week, to sanction Wolfowitz. Even if the vote is a reprimand, they said, it could effectively make it impossible for him to stay on.

The Europeans worked to arrange a quick exit for Wolfowitz as a special bank committee concluded that he was guilty of breaking rules barring conflicts of interest in arranging for a pay raise and promotion for Shaha Ali Riza, his companion and a bank employee, in 2005.

The decision was sent to Wolfowitz on Sunday night after a month of turmoil over the situation. The panel's findings were not made public, but people familiar with the report said that it reviewed documents and testimony before concluding that Wolfowitz had breached his obligations in arranging for Riza's reassignment from the bank to the State Department.

"What I'm hearing from colleagues is, 'Let's not push the Americans too hard,' " said a senior European official involved in policy on the bank. "We want to avoid a split between the United States and its European allies. We're willing to say: 'O.K., you find a capable American to run this institution and we can live with that.' "

In another sign of Wolfowitz's difficulties, his top communications aide, Kevin Kellems, resigned Monday, saying that "the current environment surrounding the leadership" at the bank made it "very difficult to be effective in helping to advance the mission of the institution."

Kellems said in a statement that he had "tremendous respect and admiration" for the bank's staff but made no mention of Wolfowitz, with whom he had a close association when the bank president was deputy secretary of defense.

European officials did not disclose details of how they were communicating with the Bush administration, but they said the suggestion that Wolfowitz resign in return for having an American successor was first raised with Treasury Secretary Henry Paulson Jr. in mid-April.

Well before Wolfowitz took office in 2005, leading European countries had begun agitating to discard the custom that had existed since the 1940s of the United States choosing the bank president. The United States has that prerogative because it contributes the largest share of the bank's financing.

Bush administration officials say that American leadership of the World Bank is essential to maintaining influence over its policies and priorities, including which bank programs and countries receive financing. The officials fear that if the bank is headed by someone lacking the confidence of Congress and Americans in general, it could lead to a breach similar to the one between the former United Nations secretary general, Kofi Annan, and critics on Capitol Hill.

European countries customarily choose the chief of the bank's sister institution, the International Monetary Fund, though a European-American conflict has arisen there as well. Its focus is a drive supported by the Bush administration to reduce the European voting share in favor of China and other fast-growing countries.

The United States has 16.4 percent of the voting share at the 24-member World Bank board that chooses the president. Europeans have twice that share if they stick together, which many bank officials say they have signaled they are willing to do to remove Wolfowitz.

The senior European official said Wolfowitz's credibility was now "beyond repair."

That view has echoed through the bank's ranks. Hundreds of bank employees assembled at an auditorium on Monday to hear Mark Malloch Brown, the former top aide to Annan at the United Nations, say that with Wolfowitz in charge, the bank's anti-poverty agenda was "hugely at risk" because Europeans were balking at the financing.

No bank president has ever resigned in a crisis atmosphere like the current situation, so there is no precedent for what would happen if he left.

The committee's finding of guilt against Wolfowitz was tempered by a finding that the bank shared at least some blame for the failure of Wolfowitz to comply with its rules. According to people familiar with the report, it said the advice from ethics officials at the bank to Wolfowitz was less than clear and evidently subject to misinterpretation. Nevertheless, the report was clear in its conclusion that Wolfowitz breached his obligations.

Wolfowitz's lawyer, Robert Bennett, said the bank was giving Wolfowitz too little time to rebut its conclusions before a board vote later this week.

"I don't feel it would be appropriate to share the report, but I am deeply troubled that they have only given us 48 hours to respond," he said in an interview. "This is not fair to Mr. Wolfowitz."

The report, as transmitted to Wolfowitz, did not recommend any punishment for him. Bank officials, speaking anonymously because the proceedings are supposed to be confidential, said that the special committee was still working Monday on what to recommend.

It was not clear whether the committee, consisting of 7 of the bank's 24 board members, would recommend removing him from office or, more likely, express a loss of confidence in his leadership in a manner intended to force his resignation. Bank officials say a majority of the bank board has determined that he should go.

The Bush administration has repeatedly backed Wolfowitz, but President George W. Bush and Paulson have also called for the completion of the bank's internal review process. Now that that is done, the administration is likely to face renewed pressure.

European and American officials say that Paulson has said that the bank process must be respected before the United States is pushed into a position on Wolfowitz. Several European officials said they believed that Paulson was in favor of Wolfowitz leaving, but that Bush and Vice President Dick Cheney were insisting on standing up for him.

Wolfowitz's selection in 2005 drew enormous criticism in Europe, but France and Germany wanted to repair the wounds left from their opposition to the Iraq war and went along with him.

That mood has changed, many European officials say. As expressed in editorials, political commentaries and even blogs, European sentiment is against Wolfowitz and in favor of more aid for poor countries.

Chancellor Angela Merkel of Germany favors Wolfowitz's resignation, people familiar with her thinking say, but is also eager to avoid a confrontation with Bush. But as chief of the European Union, she is said to feel obliged to reflect European views, put forth in the European Parliament's call last month for Wolfowitz to resign.

Prime Minister Tony Blair of Britain, due to step down as soon as this summer, has stood by Bush, but his presumed successor, Gordon Brown, the chancellor of the exchequer, has tangled with Wolfowitz on some bank policies.

European officials say that the Netherlands and the Nordic countries have been most critical of Wolfowitz.

Bank officials say that, as of now, only the United States, Japan and Canada would vote in favor of Wolfowitz. They represent less than 30 percent of the voting shares. Most directors are said to be willing to vote against Wolfowitz, but some countries, mainly in Africa, are said to be wavering.