Paul Wolfowitz finally succumbed to the mounting pressure and resigned from the World Bank on Thursday. This brings down the curtain on a protracted battle over his involvement in arranging a pay scale for his girlfriend at the bank. Here is his parting statement:

...I have concluded that it is in the best interests of those whom this institution serves for that mission to be carried forward under new leadership. Therefore, I am announcing today that I will resign as President of the World Bank Group effective at the end of the fiscal year.

Clearly, his resignation from the bank is not immediate and he will continue in the office until June 30, the end of bank’s fiscal year.

His resignation comes a day after there were reports of negotiations between the Bank’s board and Wolfowitz. They were looking to execute a face-saving exercise in the interest of both the parties. It looks like Wolfowitz got what he wanted. He was seeking recognition by the board that dispersed the blame for his acts equally between Wolfowitz and Bank’s ethical committee. This is what he said in this regard:

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 in what I believed were the best interests of the institution, including protecting the rights of a valued staff member.

The statement of Executive Directors also acknowledged this and read:

We also accept that others involved acted ethically and in good faith. At the same time, it is clear from this material that 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 under which they were placed.

The resignation means that Wolfowitz becomes the first ever president to resign under fire, since the Bank was established in 1944. It also spells an end for his tenure at the bank, which didn’t even complete its half term.

Eye of the storm

The center of controversy was the allegation that Wolfowitz had arranged a hefty pay raise for his companion at the bank, Shaha Riza. Wolfowitz was held guilty on that account by the special panel appointed by the WB. The panel submitted its final report on Monday and condemned him for the indiscretion. He was pronounced guilty of arranging a $47,300 pay raise for his companion in 2005, and consequently of violating the staff rules.

Reaction to the news

The most detrimental factor for Wolfowitz’s case was the fact that he lost support of the bank’s employees as soon as the allegations surfaced. He clung on to his job regardless, but ultimately, the ‘against’ lobby triumphed. European governments, which wanted him to resign, were much relieved by yesterday’s proceedings. White House, again, reiterated its support for Paul Wolfowitz, but, President Bush, had to accept his resignation ‘reluctantly.”

Employees were ecstatic when they heard of the news and were seen clapping and hugging inside the Bank. Many were relieved that the impasse was finally over.

Hunt for the successor

With Wolfowitz out of the picture, speculations have already started regarding his successor. In spite of numerous quarters calling for a change in convention under which U.S. names WB’s President, it is clear that this practice will continue. George Bush has lost clout in several spheres, but here, he would be unwilling to concede. Several names are being discussed in the political sphere. Some of these are - Robert Zoellick (Deputy Secretary of State), Robert Kimmit (No. 2 at the Treasury Department), Henry Paulson (Treasury Secretary), Jin Leach (former Republic Congressman) and Stanley Fischer (formerly at IMF and now with the Bank of Israel.)

The Wolfowitz drama (if I may say so) had everything. He gave a brilliant performance by shifting his stance again and again and again. Sorry at first, he soon adopted a conciliatory tone only to declare later that he was a victim of ‘Smear Campaign.‘ His end was tame but he can at least enjoy a last laugh for being able to distribute the blame around.

World Bank’s issues are deeper than just Wolfowitz. Wait and watch; the end might just be a beginning. Are much needed reforms on the cards?

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