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Analysis: Wolfowitz Leaves Bank Under Cloud

Council on Foreign Relations

May 18, 2007
Prepared by: Lee Hudson Teslik

World Bank President Paul Wolfowitz will step down June 30, ending a drawn-out dispute that cast a cloud over the Bank’s governance agenda. The Washington Post said Wolfowitz agreed to leave after it was clear he faced reprimand or dismissal by the Bank’s board over charges he provided a promotion and pay-raise to his girlfriend, a Bank employee. After protracted negotiations, Wolfowitz won acknowledgement from the Bank that he acted “ethically and in good faith,” saying he was resigning for the good of the institution. A board statement said “a number of mistakes were made by a number of individuals in handling the matter” and a review of the Bank’s governance procedures was necessary.

Wolfowitz’s departure won’t necessarily end the World Bank’s woes. First there is the issue of picking a successor. Washington currently bears responsibility for this process, though European leaders say they are keen to change this dynamic (FT). Any candidate too close to President Bush could be a political non-starter. Der Spiegel suggests three possible candidates: Paul Volcker, the former U.S. Federal Reserve chairman; Tony Blair, Britain’s outgoing prime minister; and Stanley Fischer, the governor of the Bank of Israel. The Wall Street Journal cautions that the selection process could be contentious and argues a highly publicized dogfight could further weaken the Bank’s standing in the world.

A slew of policy questions also remain unanswered. One primary concern is whether a new president would choose to maintain Wolfowitz’s emphasis on the bank’s anticorruption campaign—the credibility of which, many experts believe, suffered dramatically over the course of the present scandal. More fundamentally, a successor will have to navigate uncomfortable questions of the Bank’s relevance in an era where private equity is increasingly targeting the developing world (HBS).

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Copyright 2007 by the Council on Foreign Relations. This material is republished on GlobalSecurity.org with specific permission from the cfr.org. Reprint and republication queries for this article should be directed to cfr.org.

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