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G8 finance meeting overshadowed by Wolfowitz resignation

GERMANY: The world’s most powerful finance chiefs were gathering here on the shores of the Lake Schwielowsee resort for a two-day meeting on world economic problems and prospects.

But the pow-wow was overshadowed before it started by the resignation of World Bank chief Paul Wolfowitz, with the search for his successor a likely source of friction between the US and Europe.

The finance ministers from the Group of Eight — Britain, Canada, France, Germany, Italy, Japan, the United States and Russia — were meeting ostensibly in Potsdam to discuss ways of strengthening financial market stability, supporting sound governance in Africa and regulating the 1.4-trillion-dollar hedge fund industry.

But the gathering was upstaged by the announcement that World Bank president Paul Wolfowitz — who had been originally scheduled to attend — would step down next month over a favouritism scandal.

European countries had been calling for Wolfowitz’s head in the long-running scandal over a generous secondment package for the World Bank chief’s girlfriend Shaha Riza.

The US had staunchly defended the 63-year-old former deputy defense secretary, but finally gave in to fierce European pressure with the announcement that Wolfowitz would quit on June 30.

Thus, it was highly likely that all eyes in Potsdam would now turn to finding his successor. In Washington, the White House said that President George W. Bush would soon announce a new candidate to allow “an orderly transition.”

By tradition, the United States nominates the World Bank chief while Europe names the head of its sister institution, the International Monetary Fund.

The practice has come in for criticism from developing and emerging countries, as they demand a greater say in the institutions to reflect their increasing weight in the global economy.

Aid to developing countries, and to Africa in particular, will also be on the agenda of the Potsdam talks. And delegates from countries such as Cameroon, Ghana, Nigeria and South Africa have been invited to the talks.

In an open letter published in the Financial Times on Friday, more than 60 luminaries, including five Nobel prize winners urged the G8 ministers to honour their group’s promises to end poverty.

The signatories called on G8 finance ministers to “implement innovative finance mechanisms as a key source of much needed finance for development,” and said that “the poorest countries in the world need you to honour these aid pledges” if they are to end poverty.

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