End of the World Bank Scandal: Wolfowitz Resigns

His bow from the bank will clear the way for a more credible and efficient president, say his critics. But his defenders gave him credit for fighting corruption.

World Bank President Paul Wolfowitz leaves his home in Chevy Chase, Maryland, on Thursday.
AFP

World Bank President Paul Wolfowitz leaves his home in Chevy Chase, Maryland, on Thursday.

Paul Wolfowitz ended a month of controversy at the World Bank on Thursday by announcing he would step down as president on June 30. The resignation was forced by an uproar over his role in securing a high-paying job for his girlfriend, a scandal that critics said was eroding the bank's own campaign against corruption.

The bank "needs to rebuild its credibility immediately, regain its focus and devote its full attention to its clients," according to a statement by the bank's staff association, which had been pushing for Wolfowitz's ouster along with former bank officials, aid groups, and European as well as Canadian leaders. German Finance Minister Peer Steinbrück, a Social Democrat, said "It is good for the World Bank, and it will help the bank do its work."

The White House promised to name a candidate to replace Wolfowitz "soon," said spokesman Tony Fratto, "allowing for an orderly transition that will have the World Bank focused on its mission."

The names of several potential replacements have surfaced, including US Deputy Secretary of State Robert Zoellick, who was Bush's former trade chief, US Treasury Secretary Henry Paulson, former Republican Congressman Jim Leach, Republican Senator Richard Lugar and Stanley Fishcer, who once worked at the International Monetary Fund and now works for the Bank of Israel.

But no one has been nominated. "Any reporting on potential names is pure speculation," a White House official told the Associated Press.

An Anti-Corruption President, Corrupted

Wolfowitz had resisted pressure to resign for weeks, after it became clear in April that he'd helped his girlfriend, Shaha Riza, win a generous salary and a promotion at the US State Department. Riza had been a Middle East expert at the bank until 2005, when Wolfowitz was named president. Bank officials had asked him to help her move out of the bank to avoid any conflict of interest. He did, but he also helped negotiate her salary at the State Department -- a decision he said he "regretted" and called "a mistake."

A bank panel found his involvement also broke a number of the institution's rules.

Before his tenure at the bank Wolfowitz had served in the State Department, where as Deputy Secretary of Defense he'd helped plan the Iraq war. The shift of a war architect from the Pentagon to the World Bank echoed Robert McNamara's career change in the middle of the Vietnam War. McNamara had been Secretary of Defense -- and the most prominent American war hawk -- when he was named the bank's president in 1967.

Strong opposition in Europe

Opposition to his nomination was strong in Europe in 2005, and European leaders have made regular calls for his resignation over the last few weeks. His tenure at the bank may not have lived up to prophecies of disaster at the time -- "It is a truly terrifying appointment," said Peter Hardstaff, of the London-based World Development Movement, in 2005 -- but Wolfowitz' critics have argued for weeks that the nepotism scandal hurt his credibility in fighting corruption among governments the bank intended to help.

"I just returned yesterday from a mission in West Africa where I was beginning to feel most acutely the impact of the crisis … in terms of the legitimacy we have in advocating good governance," said Daniel Owen, from the World Bank's social development department, according to Reuters. "We've got a job to do now in rebuilding our credibility on those issues, and it's going to be easier now that Wolfowitz is gone."

But Wolfowitz also had prominent defenders around the world. The recent strong campaign at the bank against corruption in aid programs and in debtor governments was the product of Wolfowitz's own initiative, and many in Asia and Africa said it had been effective. "I think he's doing a good job," Japanese Finance Minister Koji Omi said earlier this week. "We evaluate his work highly."

In Indonesia -- where Wolfowitz had served as United States ambassador in the 1980s -- an economist for Standard Chartered Bank named Fauzi Ichsan told Reuters, "… it is such a shame for a man like him to resign. He was well known for his vigorous anti-corruption campaign and his poverty eradication."

Other observers pointed out that Wolfowitz' position at the bank was weakened not just by the recent scandal but also by his management style, which alienated a lot of staff. Author and columnist Sebastian Mallaby, a World Bank expert who's been known to defend Wolfowitz, told SPIEGEL ONLINE that he "has a Trotsky mentality, as one often finds among emotional conservatives. In other words: You trust only your own, narrow group of loyalists. The rest of the world is against you."

The 185-nation World Bank was established in 1945 to rebuild Europe after World War II. It provides more than €14.8 billion ($20 billion) every year for projects like roads and dams, education and health -- often in the shape of interest-free development loans to poor countries.

The bank is traditionally run by an American. The United States is its largest shareholder and its biggest financial contributor.

msm/ap/reuters/spiegel

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