The Catholic University of America
Stephen Schneck, chair and associate professor, politics, and director of the Life Cycle Institute, was quoted in a Bloomberg News article about the controversy surrounding World Bank president Paul Wolfowitz and his role in assuring his girlfriend, who works for the bank, received a raise. See the story below.


Wolfowitz Rejects Calls to Resign as World Bank Head

From: Bloomberg News
Date: April 16, 2007
Authors: Christopher Swann and William McQuillen

April 16 (Bloomberg) -- World Bank President Paul Wolfowitz rejected calls to resign even after a panel representing the governments that fund the agency rebuked him for a decision to promote his girlfriend.

"I believe in the mission of this organization, and I believe I can carry it out," Wolfowitz, 63, told a press conference in Washington yesterday. "This is important work, and I intend to continue it."

World Bank directors are weighing Wolfowitz's future after finding that he personally dictated the terms of his partner's salary increase and promotion. The raise was twice as large as allowed by bank rules, according to the Staff Association, which represents 13,000 employees and is demanding Wolfowitz resign.

Minutes before Wolfowitz spoke, the Development Committee, which represents the 185 member nations of the World Bank and the International Monetary Fund, issued a statement saying "the current situation is of great concern to all of us."

"We have to ensure that the bank can effectively carry out its mandate and maintain its credibility and reputation as well as the motivation of its staff," the committee said.

The controversy spurred renewed calls for changes to the way the leaders of the two institutions are selected. The bank's president is nominated by the White House and has always been an American. The IMF's managing director, currently former Spanish Finance Minister Rodrigo de Rato, is usually European.

'Based on Merit'

"The selection of senior management of the IMF and World Bank should be based on merit and ensure broad representation of all member countries," South Korean Deputy Finance Minister Kim Sung Jin told the Development Committee. Kim also represents Australia and New Zealand on the panel.

The World Bank and the IMF were founded in 1944 as the eventual victors of World War II planned for the postwar economic order. The bank, created to help rebuild Europe, has since changed its mission to fighting poverty. It lends about $23 billion a year.

France and Germany, among the largest shareholders in the bank, have declined to back Wolfowitz, leaving him dependent on the support of the Bush administration -- the largest World Bank donor. Even some American allies, such as Britain, have admonished the former U.S. deputy secretary of defense.

The Bush administration, so far, is standing behind Wolfowitz and Treasury Secretary Henry Paulson praised him on April 13 as a "very dedicated public servant." The administration also said it will wait for the World Bank board to complete its deliberations.

Mounting Pressure

"The noose has been tightening," said Devesh Kapur, co- author of the official history of the World Bank and an economics professor at the University of Pennsylvania in Philadelphia. "The fact that the normally anodine Development Committee issues such a strong statement suggests that his presidency is irreparably damaged."

Wolfowitz apologized last week for granting the raise to Shaha Riza, 52, an eight-year bank veteran who worked as a communications officer. To comply with bank regulations that forbid one partner to report to another, she was transferred to the State Department while remaining on the bank payroll.

The uproar was caused by the decision to give the Libyan- born Riza a promotion and a 36 percent pay increase. The following year, she received a 7.5 percent raise, bringing her salary to $193,590, more than is earned by Secretary of State Condoleezza Rice.

'Painful Personal Dilemma'

Wolfowitz, who is divorced, depicted his decision to promote Riza as a good-faith effort to carry out recommendations of the board's ethics committee. Still, "I take full responsibility for the details," he said last week, and appealed for understanding of a "painful personal dilemma."

The probe of Riza's promotion overshadowed the semi-annual meetings of the World Bank and the IMF in Washington. "The whole business has damaged the bank and should never have happened," U.K. International Development Secretary Hilary Benn told reporters.

Wolfowitz faced skepticism from the start of his term in June 2005 because of his role as an architect of the war in Iraq. He also ruffled feathers among staff and board members with his drive to fight corruption in developing nations.

"He's never been a popular person," Swiss Economics Minister Doris Leuthard told reporters in Washington on April 14. "It's about maintaining the World Bank's credibility."

Critics charged that Wolfowitz presided over an exodus of experienced managers, while relying on a coterie of advisers recruited from the Bush administration.

Staff Changes

Among those who left was Christiaan Poortman, the vice president for the Middle East and a 30-year bank veteran who resisted plans to add staff in Baghdad. New faces included Kevin Kellems, a former spokesman for U.S. Vice President Dick Cheney, and Robin Cleveland, formerly an associate director of the White House Office of Management and Budget.

"This is a guy that has a small group of people that is very loyal to him and a large group that don't like him immensely," said Steven Schneck, head of the politics department at Catholic University in Washington.

The controversy erupted as Wolfowitz sets out on a yearlong campaign to raise as much as $28 billion for the bank's International Development Agency, which dispenses aid to the world's poorest nations.

"It's more difficult to get the institution behind you if you have a problem like the one he is facing," said Morris Goldstein, a senior fellow at the Peterson Institute for International Economics in Washington.

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