World Bank: 'All options open' says White House

The White House offered an apparent olive branch to international critics over embattled World Bank president Paul Wolfowitz, saying “all options are on the table” about who should lead the bank, even as it continued to defend the former Pentagon number two.

The comment was the first time that the White House indicated that it might be open to Wolfowitz’s departure.

Wolfowitz, who is accused by a special bank panel of breaking conflict-of-interest rules, maintains that he acted in good faith in arranging a generous pay package for his girlfriend, a bank employee.

He waged a vigorous fight to keep running the institution early today, defending himself before the panel.

The board, which met behind closed doors, will ultimately decide what actions to take against him. It was unclear whether any decision would emerge from today’s session.

“We have faith in Paul Wolfowitz,” White House spokesman Tony Snow said, insisting that the accusations against the architect of the Iraq war were not “a firing offence”.

Only after the charges against Wolfowitz were resolved, he said, would it then be appropriate to consider the bank’s leadership going forward.

“Separately, at some point in the future there are going to be conversations about the proper stewardship of the World Bank,” Snow said. “In that sense … all options are on the table.”

The overture could be viewed as an attempt to calm European allies who are clamouring for Wolfowitz to step aside.

Promising future conversations, and separating them from the process of determining Wolfowitz’s fate based upon the pay package issue, could give those speaking against Wolfowitz the sense that their concerns will be addressed at some point.

Snow’s comments came a day after a special bank panel concluded that Wolfowitz broke bank rules in his handling of the pay package. It said the board must consider whether Wolfowitz “will be able to provide the leadership” to ensure that the bank achieved its mission of fighting poverty around the world.

Wolfowitz described the ruling as unfair and unwarranted.

A conference call – convened by the US – among officials from the world’s seven most industrialised countries failed to produce a consensus on the White House’s call for the Wolfowitz conflict of issue charge to be handled separately from the bank’s future leadership. Only Japan backed the US. The other countries on the call were Canada, Italy, France, Germany and Britain.

The controversy involves Wolfowitz’s handling of the 2005 compensation package for his girlfriend, Shaha Riza.

The special panel said that Wolfowitz’s involvement in the details of Riza’s salary “went beyond the informal advice” given by the ethics committee and that he “engaged in a de facto conflict of interest”.

Riza worked for the bank before Wolfowitz took over as president in June 2005. She was moved to the US State Department to avoid a conflict of interest but stayed on the bank’s payroll. Her salary shot up from nearly €97,000 a year to €144,000. With subsequent rises, it eventually rose to nearly €141,000.

The panel concluded that the salary increase Riza received “at Mr Wolfowitz’s direction was in excess of the range” allowed under bank rules.

Wolfowitz, recommended for the World Bank presidency by President George Bush, took over the bank nearly two years ago.

The White House believes that the controversy is rooted not as much in what he did, but in his role as a key architect of the Iraq war.

US secretary of state Condoleezza Rice and treasury secretary Henry Paulson have also said they do not think the facts in the conflict-of-interest case merit Wolfowitz’s dismissal.