Britain 'steadfastly supports Bank'

Mr Wolfowitz announced late on Thursday night that he would quit at the end of June after coming under intense pressure over his handling of a pay package for his partner, an employee at the Bank.

There was immediate speculation that outgoing Prime Minister Tony Blair - due to leave office on June 27 - might be among those under consideration to take the helm of the multinational institution.

Mr Wolfowitz - a close ally of US president George Bush and a key architect of the war in Iraq - fought hard to hold on to his position amid a growing storm after it emerged that he helped arrange a pay increase and promotion for Shaha Riza in 2005. But he was all but forced out by the finding of a special Bank panel that he broke conflict-of-interest rules.

In a statement issued after the announcement of Mr Wolfowitz's departure, Mr Benn said: "I am relieved that this damaging time for the Bank is finally over.

"I acknowledge the achievements of the Bank over the past two years. It has helped to deliver debt relief to the poorest countries, agreed a new African action plan and is investing more in education, health and clean water.

"The Bank's task now is to renew its efforts to lift people out of poverty. The UK remains a steadfast supporter of the Bank, and its staff, as a force for good in the world."

One of America's most respected economists, Joe Stiglitz, a Nobel Prize winner and former senior vice president at the Bank, said that Mr Blair was in the frame as a possible replacement for Mr Wolfowitz. Professor Stiglitz told BBC Radio 5 Live: "He is one of the people that is clearly being discussed.

"I think it would be good for the institution at this juncture if they had somebody who was an economist who really understood what development entailed and could work closely with the staff that has been very alienated by Paul Wolfowitz over the last two years and bring together the institution.

"It wouldn't rule (Blair) out, but I would say that if I were going through a first priority list of priorities, it would probably begin with somebody with real experience in development."