US tells Europeans it awaits World Bank board

Washington, Apr 17: US Treasury Secretary Henry Paulson urged European aid ministers in a weekend meeting to hold off on judging World Bank President Paul Wolfowitz until after the bank's 24-nation board decides on his future, European sources said.

Officials from Germany, Britain, France, the Netherlands and Italy, among others, sought a meeting with Paulson on Sunday over their concerns the bank's reputation would suffer from the controversy over the high-paying promotion Wolfowitz agreed to for his bank-employee girlfriend, European sources told Reuters.

In the meeting, Paulson yesterday told the ministers the United States continued to back Wolfowitz and said it was waiting to see the outcome of the board's decision, the sources said.

Meanwhile the White House, which engineered his move to the poverty-fighting institution from the Pentagon's number two slot in mid-2005, yesterday renewed its support for him.

''Let me just reiterate for you that the president does have full confidence in Paul Wolfowitz,'' said White House spokeswoman Dana Perino.

''He's focused on Africa and other areas around the world that need the World Bank's attention. And the president continues to have confidence in him,'' Perino added.

A committee of aid ministers from around the world, attending a meeting here on Sunday, said it was crucial the bank's credibility not be tarnished by the controversy over the promotion and salary increase Wolfowitz approved for his companion, Shaha Riza, before she was assigned to the State Department because of their relationship.

'Great Concern'

The aid ministers' committee issued a strongly worded statement that it had ''great concern'' the institution may not be able to function properly with the controversy swirling around its president.

Wolfowitz's decision to stick it out could mean the issue will drag on while the bank's 24-nation board decides on the matter.

Board decisions are usually made through consensus rather than by vote.

While criticized by some European countries, Wolfowitz has found backing from African countries.

In New York, British development minister Hilary Benn repeated concerns over the scandal.

''Let's be blunt about this, what's happened is very very damaging to the bank and it simply can't continue,'' he said.

In Brussels, a spokesman for EU Aid Commissioner Louis Michel said the European Union was concerned about the World Bank's reputation.

''We are concerned about the institution, we are concerned about these allegations and of course we are monitoring it,'' the spokesman said. ''We hope this will be dealt with in the proper way.'' There is fear inside the bank that the scandal may jeopardizes discussions this year of wealthy donor countries to commit new funds for the bank's International Development Association (IDA) program, which lends to poor countries.

The IDA negotiations, which occur every three years, were already expected to be tough before the Wolfowitz controversy erupted, because of a funding gap left by a decision by donors in 2005 to write off the debts of poor countries.

Reuters