In an exclusive interview, the American Nobel laureate said: "The World Bank will once again become a hate figure. This could bring street protests and violence across the developing world." He described President Bush's determination to appoint his deputy defence secretary to the important post as "either an act of provocation or an act so insensitive as to look like provocation". Wolfowitz is widely regarded as the creator of the policy that led to the US war in Iraq.

The choice of Wolfowitz has also created a dilemma for Tony Blair and Gordon Brown. They fear he would stand in the way of their high-profile initiative to alleviate African debt and poverty. However, they are reluctant to spark a dispute with the White House by going public with their concerns. "This is a big problem for us," said an official close to the chancellor. "We are still working out what to do."

The presidency of the World Bank is in the gift of the White House, while the International Monetary Fund, its sister body, is normally run by a European. The Bank is the world's most important development institution. It is the main lender to poorer countries for a whole range of projects, including the fight against poverty and HIV/Aids.

In an interview with Liam Halligan, the economics correspondent of Channel 4 news, Stiglitz said he was concerned that the Bank would "become an explicit instrument of US foreign policy". He added: "It will presumably take a lead role in Iraqi reconstruction, for instance. That would jeopardise its role as a multilateral development body."

This is Stiglitz's first public utterance since last week's nomination. When he was the World Bank's chief economist - under the current president James Wolfensohn, whose decade-long tenure ends in June - he played a major role in rebuilding its battered reputation.

Stiglitz said Wolfowitz was unsuitable in part because the US war in Iraq remains profoundly unpopular in many of the territories where the World Bank works. But he also complained that Wolfowitz has the wrong skills.

"He has no training or experience in economic development or financial markets," Stiglitz said. The Bank was the most important institution addressing poverty, he said. "We need someone in charge who knows. . . development."