Paul Wolfowitz was preparing last night to resign as World Bank president. He was negotiating a face-saving exit in which the institution would take partial blame for the row over his girlfriend’s pay rise.

The news came a day after the White House softened its previously unwavering support for the embattled head of the World Bank. According to bank officials, Mr Wolfowitz and senior officials were fine-tuning a formula by which the institution would admit “some responsibility” for bad advice over the $50,000-a-year, tax-free pay increase for Shaha Raza, a British citizen.

Making clear Mr Wolfowitz’s determination not to leave before his name had been cleared, his lawyer, Robert Bennett, said: “Mr Wolfowitz will not resign under this cloud and he will rather put this matter to a full vote [of the board].”

As Tony Blair arrived in Washington for a two-day visit, a Downing Street source said: “I am sure this situation will be resolved by the time [President Bush] has his press conference with the Prime Minister [today]. I am sure that in their meeting they will be discussing who the successor should be.”

On Tuesday evening, after the White House appeared to cut him adrift by acknowledging that “all options are on the table”, Mr Wolfowitz made an impassioned plea to the 24-member board to clear his name.

In a report on Monday the bank’s ethics panel had found him guilty of breaking bank rules in dictating the terms of his girlfriend’s pay rise when she transferred to the US State Department.

In a challenge to the board to declare him unfit to continue as president, the ethics panel said his actions had produced a “crisis of leadership” and so damaged the bank’s reputation that the 24 shareholder governments must now debate whether he is capable of ensuring that it can carry out its mandate to fight global poverty.

Tony Snow, Mr Bush’s White House spokesman, said that the crisis had been a “bruising episode” for the World Bank that could affect its integrity. But Mr Wolfowitz told the board: “I acted in what I believe were the best interests of the institution. I implore each of you to be fair in making your decision because it will not only affect my life but it will affect how this institution is viewed.”

Henry Paulson, the US Treasury Secretary, has called finance ministers from shareholding countries, including Britain, to suggest that the issue of Mr Wolfowitz’s conduct should be separated from later questions over the bank’s leadership — which the US concedes must be addressed.

This proposal is believed to have been deemed unacceptable by European countries that together can muster more votes than the US on the bank’s board. One source said: “The signature policy of the bank under Wolfowitz is tackling corruption. How can we look African countries in the face if he is still there?”

Heidemarie Wieczorek-Zeul, the German Development Minister, said: “He would do the bank and himself a great service if he resigned.” She added that Mr Wolfowitz would not be welcome at an Africa forum the bank is holding next week in Berlin if he refused to resign.

Denmark, a key contributor to development projects in poor countries supported by the World Bank, said that it was difficult to see how Mr Wolfowitz could stay on. “There is no doubt that the panel’s report is very damaging for Paul Wolfowitz as head of the World Bank,” said Ulla Tornaes, the Danish Development Minister. “And there is also no doubt that the prerequisites for continued co-operation between Wolfowitz and the bank’s board doesn’t seem to exist. It’s difficult to see how he can continue.”

The controversy is viewed by US conservatives as a cynical ploy by Europeans to get rid of Mr Wolfowitz because of his role as a chief architect of the Iraq war and because they disagree with US policies.

On the brink

March 31, 2005 Wolfowitz approved as World Bank president

May 2005 Alerts bank’s ethics committee to his relationship with Shaha Riza. It recommends that she be relocated beyond his influence

July 2005 Bank’s ethics committee rules that there is a “de facto conflict of interest” in his relationship with Shaha Riza

August 11, 2005Wolfowitz authorises Riza’s secondment to the US State Department, along with $50,000 pay rise

April 6, 2007 Bank’s executive directors investigate the promotion

April 12 They report he violated rules; he apologises

April 30 Refuses to step down, saying he is the victim of ‘smear campaign’

May 14 Final damning report on the affair

Source: Times database

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