Paul Wolfowitz's decision to resign as World Bank president has averted a damaging confrontation between the United States and its main economic partners, writes Denis Staunton, in Washington.
However, it has opened up a period of uncertainty over the future of an institution that distributes $22 billion (€16.2 billion) in loans and grants to some of the world's poorest countries.
Washington's failure to save Mr Wolfowitz, a close ally of president George Bush and a key architect of the Iraq war, represents an embarrassing demonstration of the limits of the administration's diplomatic clout as it enters its final months in power.
The White House made clear yesterday that it was in no mood to countenance further humiliation by bowing to demands for an end to the convention that the World Bank president is always an American while the head of the International Monetary Fund (IMF) is a European.
Some 165 of the world's leading international development experts and non-governmental organisations said this week that part of Mr Wolfowitz's problem was that he identified to closely with US interests and it was now time to change the old way of appointing the president. "That outdated convention should be abandoned and replaced with selection procedures that reflect two key principles: transparency of process and competence of prospective leadership without regard to national origin," they said.
As the biggest contributor to the bank, the US also has, with 16.4 per cent, the largest share of votes on its board. Other large donors such as Germany and Britain also have a seat of their own on the board and enjoy a substantial voting share.
While the IMF has lost influence in recent years and some Europeans favour a change in the appointments procedure, most EU governments are content to stick with the status quo.
Despite Washington's voting strength, it was unable to muster a majority of votes this week to prevent the board from taking action against Mr Wolfowitz, although a straight vote to sack him would most likely have failed.
With the next president certain to be an American, speculation that Tony Blair could take over can be laid to rest.
Among the names being discussed in Washington yesterday were Douglas Warner, former chairman of JPMorgan Chase, and Richard Levin, an economist who is president of Yale and close to Mr Bush.
Also being mentioned are Bill Frist, the former Senate majority leader from Tennessee, and Bob Zoellick, the former deputy secretary of state and trade representative.
Mr Zoellick is popular in Europe, although he never quite hit it off with his opposite number in the trade portfolio, Peter Mandelson.
In choosing a successor to Mr Wolfowitz, the White House must decide if it wants to risk further battles by sending in another aggressive crusader for change or to make peace with its disgruntled allies by appointing a conciliatory figure who will try to reform the bank in concert with its staff.
