POTSDAM - World finance chiefs were gathering at a resort on the shores of Lake Schwielowsee for a two-day session here Friday as debate raged over who will succeed Paul Wolfowitz as head of the World Bank.
The finance ministers from the Group of Eight -- Britain, Canada, France, Germany, Italy, Japan, the United States and Russia -- were meeting ostensibly to discuss world economic problems and prospects.
But the talks were overshadowed before the announcement that Wolfowitz will step down in June, with the search for his successor a possible source of friction between the world's different economic blocs.
Topping the official agenda of the meeting, just outside Potsdam, were ways of strengthening financial market stability, supporting sound governance in Africa and regulating the 1.4-trillion-dollar hedge fund industry.
But ahead of the start of the meeting, media coverage was dominated by the resignation of Wolfowitz in the face of a favouritism scandal and the ensuing debate about who should succeed him.
By tradition, it is the United States as the World Bank's biggest stakeholder that nominates the bank's chief, while Europe names the head of its sister institution, the International Monetary Fund.
And in Washington, the White House said that President George W. Bush would soon announce a new candidate to allow "an orderly transition."
But questions were being raised about the current nomination practice.
Dutch Cooperation and Development Minister Bert Koenders proposed that the traditional US-European agreement be abandoned.
And International development agency Oxfam said the practice "disempowers poor countries, the main clients of the Bank and the IMF."
"The US and other rich countries must now show that they are serious about good governance by allowing the next head of the bank to be appointed based on merit through an open accountable process," said Bernice Romero, advocacy director of Oxfam International.
Japan, which is the second-biggest contributor to the bank, said the nationality of Wolfowitz's successor should be decided by the poverty-fighting institution itself.
But the host of the Potsdam meeting, German Finance Minister Peer Steinbrueck, said it was "probably best in this situation to stick to existing procedures."
Wolfowitz had been scheduled to brief finance ministers on a World Bank programme for fighting corruption and illegal transfers of capital. But he would no longer be in Potsdam, Steinbrueck told a news briefing. And no other World Bank official was scheduled to replace him.
"They've got other things to do at the moment," Steinbrueck said.
Wolfowitz's decision was "the right step," the German finance minister added.
Good financial governance in Africa and the development of bond markets in developing countries, were also topics scheduled to feature highly in Potsdam, with delegates Cameroon, Ghana, Nigeria and South Africa invited to the talks.
Global warming would similarly be discussed, as would the issue of stricter controls over speculative hedge funds, a topic championed by the meeting's host, Germany, which currently holds the G8 presidency.
The US and Britain have so far been reluctant to join Germany's campaign.
Steinbrueck insisted that there was no suggestion that concrete agreement could be reached on the matter, even by the wider G8 summit of government leaders in Heiligendamm at the start of June.
But the minister hoped consensus could be struck on a voluntary code of conduct for the hedge fund industry "in the next few months."
"Our aim is much more medium-term in nature. But we hope to make progress by the end of our G8 presidency," Steinbrueck said.
The minister insisted that Berlin's advocacy of a system of self-regulation for the industry -- where the funds themselves would implement the rules and make sure they were adhered to -- had the support not only of governments and institutions such as the ECB but also within the banking sector and even the industry itself.
"We've struck a nerve", he said.
05/18/2007 13:47 GMT