Translated material
Bush's favorite
By supporting Paul Wolfowitz, the White House undermined the reputation of the World Bank.
The “Spring Meetings” of the governing bodies of the International Monetary Fund and the World Bank, which ended yesterday in Washington, will forever go down in the history of international financial organizations. Just as in 2000, anti-globalists destroyed the historical center of Prague, trying to storm the Palace of Congresses, where the annual meeting of shareholders of the IMF and World Bank was held, this weekend the administration of US President George W. Bush dealt another crushing blow to the viability of these international institutions.“Our president has confidence in Paul Wolfowitz and his work at the World Bank,” White House spokeswoman Dana Perino said Friday in response to a question from an ITAR-TASS correspondent. Thus, the Bush administration decided, contrary to any logic, to fight for its nominee - former First Deputy Secretary of Defense Paul Wolfowitz, who headed the World Bank in 2005, and who has found himself in recent days at the center of an unprecedented scandal . As you know, the WB workers' union accused Wolfowitz of favoritism . The crux of the charge is that Wolfowitz mishandled a serious ethical issue when he came to work at the bank. By that time, Shah Riza, with whom the former Deputy Minister of Defense had a romantic relationship, was already working at the World Bank. Wolfowitz consulted with the board's ethics committee, and Ms. Riza, while remaining employed at the bank, was formally "seconded" to the State Department. The result of this “business trip” was an increase in her salary by almost half - from more than 130 to 193 thousand dollars a year. It was the disproportionate increase in salaries (it was higher than the salary of US Secretary of State Condoleezza Rice) that, according to WB employees, was a consequence of “favoritism.”
Perhaps, if we were not talking about Wolfowitz, who proclaimed the fight against corruption as his mission at the World Bank, less attention would have been focused on this story. However, on Thursday, the bank’s board of directors met for an emergency meeting to discuss the “personal matter” of the WB president. The meeting lasted for several hours and resulted in the publication of the bank's internal reports on the incident with Ms. Riza. The dossier compiled by the ethics committee includes 100 pages of “highly confidential” documents. The board said in a statement that directors "will take expeditious action to determine possible next steps."
Wolfowitz himself, coming out of the meeting to the press, said: “I made a mistake, for which I apologize” - and expressed his readiness to make any decision that the World Bank’s board of directors deems necessary. After this, Washington turned on its “artillery”: first, US Treasury Secretary Henry Paulsen announced full support for the head of the World Bank, and then a representative of the White House.
Nevertheless, it is obvious that Paul Wolfowitz is no longer a “tenant” as president of the World Bank. Swiss Economy Minister Doris Leuthar very accurately described the ambiguity of the situation in which the World Bank finds itself. She is confident that the scandal “must be resolved as soon as possible,” since it has already “overshadowed many important issues.” "We should not make hasty decisions based on the position of some World Bank staff, given the possible political consequences, as well as the overall positive outcome of Wolfowitz's tenure as president," she said. But he adds: “It is impossible not to take into account that the issue of trust in the bank’s president is urgently on the agenda, taking into account the opinions of his employees.” “We can't wait two or three years (Wolfowitz's mandate expires in 2010). To normalize the situation at the World Bank, a decision must be made within this year,” says the Swiss minister.
However, the longer such a decision is postponed, the less capable the World Bank will be. It is obvious that the bank employees' union will not stop there and will bombard Wolfowitz with new accusations. He will be remembered for the creation of a repressive anti-corruption system, and an attempt to cut the budget of all divisions of the bank by 30% in order to increase the budget for projects in Africa, and politically motivated decisions on project financing.
The position of the White House is apparently explained by the fact that George Bush was simply not ready for such a rapid development of the scandal. Looking now, a year and a half before the presidential election, for a new “reliable” candidate for the World Bank, getting involved in complex election consultations with other shareholders of the bank, building alliances and torpedoing the initiatives of rivals - all this is completely inappropriate for Bush. But, most likely, he will have to accept the inevitable. According to all Vremya Novostei's interlocutors in Washington, resignation will occur in the very near future, the only question is how long the agony will last - a couple of days, weeks or maybe a couple of months.
While looking at its neighbors in amazement, the International Monetary Fund also lives a busy life. As you know, the IMF has been undergoing reform for several years. The Fund realized the need for reforms after the situation in the global economy ceased to produce crises in national economies and the IMF lost its borrowing clients. Now the fund is trying to find current directions for its analysis, new tools for assistance, and also to understand itself in a new way as an international organization by revising the shareholder quotas of participating countries. All these problems were discussed on Saturday at a meeting of the International Monetary and Financial Committee (IMFC), which brings together representatives of the fund's main shareholders.
Thus, given the lack of demand for IMF loans, the fund's management invented a new tool, RAL (reserve augmentation line - a line for maintaining the adequacy of reserves). It is assumed that some countries, without having gaps in the balance of payments, may still be interested in gaining access to the fund's resources in unforeseen situations. In these cases, the country can rely on funds from such a credit line automatically, without any obligations as conditions for receiving the next tranche. However, it is unclear whether there will be anyone willing to take advantage of such help.
In the area of analytics, the IMF published the results of its new experience - multilateral consultations. A year ago, the head of the fund, Rodrigo de Rato, proposed changing the format of bilateral consultations in which the fund’s work with countries is structured, and conducting them simultaneously with a number of countries. The first such consultations concerned the analysis of exchange rate policies in China, the USA, the eurozone, Japan and Saudi Arabia. It can hardly be said that these consultations revealed any sensational relationships and mechanisms. But nevertheless, the advantage of the final report is that the IMF has once again documented the need for serious reforms not only in Chinese economic policy, but also such goals as, for example, eliminating the budget deficit in the United States. The IMFC communiqué said the next multilateral consultation should focus on how financial markets can contribute to economic growth and financial stability. It is still unknown which countries will be invited to such consultations, although, apparently, the IMF will not dare to convene a “forum” of financial offshores.
In connection with the revision of quotas, the IMFC participants were unable to find any compromises, and even the chairman of the committee, British Finance Minister Gordon Brown, admitted this at the meeting. Various options for formulas for calculating national quotas are still being submitted for consideration by shareholders, which can be “played” in certain interests. The formulas use various (sometimes almost subjective) variables, while the most obvious would be a link to the GDP indicator. The initiators of the revision - developing countries, whose weight in the world economy has increased significantly in recent years - feel that the “game” is still not in their interests.
It is noteworthy that Russia’s voice is clearly heard in this dispute. Last year, Finance Minister Alexei Kudrin strongly recommended focusing on measuring quotas in accordance with the size of GDP at purchasing power parity. This time, Mr. Kudrin was unable to travel to Washington due to illness, and the delegation was headed by his deputy, Sergei Storchak. In his speech, his questions to his colleagues were formulated very clearly: “I would like to remind all participants in the discussion that sooner or later the fund will have to explain to the world community the new rules for determining quotas. How can you explain such a formula? Why are these particular variables used? Why are these particular weights used? How to prove that this is not manipulation?..” These questions will have to be answered quite soon - by the October meeting of shareholders a mechanism for revising quotas should be found.