G7 convenes with Wolfowitz fate hanging in the balance

Accused of helping to arrange a massive pay hike for his Libyan-born girlfriend

WASHINGTON - Global finance chiefs launched a new bid Friday to bridge gaps on economic and currency policy at talks clouded by a growing scandal threatening the tenure of World Bank President Paul Wolfowitz.

Group of Seven finance ministers and central bankers from Britain, Canada, France, Germany, Italy, Japan and the United States went behind closed doors divided over currency questions and moves to regulate the booming hedge-fund industry.

In the face of European unease over a weakening yen, Japanese Finance Minister Koji Omi said before conferring with US Treasury Secretary Henry Paulson: "I wouldn't be surprised if there were some open discussion of the yen, as usual."

The G7 convened at the Treasury building in downtown Washington ahead of weekend meetings of policymakers from the International Monetary Fund and the World Bank.

The three-day parley comes as attention in financial and development circles is riveted on the fate of Wolfowitz, currently facing calls that he resign because of his role in a pay scandal at the bank.

The 63-year-old World Bank chief stands accused of helping arrange a massive pay hike for his Libyan-born girlfriend, former World Bank communications specialist Shaha Riza, when she was transferred to the US State Department in 2005.

Wolfowitz on Thursday admitted to errors in the procedure under which the pay package was approved and on Friday received the backing of President George W. Bush, for whom as a deputy secretary of defense he helped plan the Iraq war.

But he still faced an open revolt from outraged World Bank staff members pressing for his departure after a stormy two-year tenure.

The World Bank's 24-member board of executive directors early Friday pinned responsibility for the pay hikes and rapid promotions given to Riza directly on Wolfowitz, leaving him more isolated than ever and his fate uncertain.

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