Paul Wolfowitz, the president of the World Bank, was fighting for his job today after he was forced to make a humiliating apology over ordering a pay rise and a promotion for a bank official, Shaha Riza, who is his girlfriend.

The board of the World Bank met in Washington this morning to discuss the fate of Mr Wolfowitz, the controversial former US Deputy Defence Secretary, amid mounting speculation that he could be forced to resign, or even be sacked, in what would be an unprecedented move.

The World Bank president said he would “accept any remedies” proposed by the institution’s directors, representing its 185 member countries, after he admitted his personal involvement in the pay rise and promotion for his partner.

A chastened and nervous Mr Wolfowitz told a packed press conference: “I made a mistake, for which I am sorry.”

Earlier, it was revealed that he had directly intervened in the arrangements for Ms Riza’s transfer to the US State Department in mid-2005 to avoid a conflict of interest after his contentious appointment as president of the Bank at the behest of the Bush White House. Under World Bank rules, staff are banned for working under a colleague with whom they are romantically involved.

Detailed emerged of a memorandum from Mr Wolfowitz instructing the bank’s head of human resources, Xavier Coll, over the terms for Ms Razi’s secondment, and which led to her being given an exceptional salary increase and enhanced annual pay awards, which raised her earnings to $193,000 a year – an overall rise of $61,000. The memo also set out arrangements for her promotion.

Today, the bank’s staff association, which claims the terms of Ms Razi’s assignment broke its rules, called for full release of all the documents related to the affair.

World Bank embarrassment over the disclosures was compounded as Mr Wolfowitz has come under heavy fire from governments and campaigners after pushing good governance and anti-corruption efforts in poor nations to the forefront of the agenda of the world’s most important development institution.

Mr Wolfowitz told reporters: “In hindsight, I wish I had trusted my original instincts and kept myself out of the negotiations.”

He insisted that he had acted throughout in good faith, seeking advice in “extensive discussions” with the chairman of the World Bank’s Ethics Committee over how the handle the conflict of interest over his girlfriend’s role.

He had sought advice because he was concerned over an “unprecedented and exceptional” situation over Mr Razi’s “involuntary reassignment”.

“I believed there was a legal risk if this was not resolved by mutual agreement,” he said. “I did not attempt to hide my actions nor make anyone else responsible.”

He made a plea for understanding: “Not only was this a painful personal dilemma, but I also had to deal with it when I was new to this institution, and I was trying to navigate in uncharted waters.”

He added: “In the larger scheme of things, we have much more important work to focus on.”

WOLFOWITZ’S WOES

Appointment as World Bank president came amid controversy over the continuation of a global “gentlemen’s agreement” that the post always goes to an American with the White House selecting a candidate.

The choice of Mr Wolfowitz, previously US Deputy Defence Secretary, sparked a row amid objections to his role as a key architect of the Bush Administration’s decision to invade Iraq.

His tenure at the helm of the bank has brought mounting criticism of his heavy emphasis on action against corruption in developing nations and accusations that he has attempted to serve US interests.

He has faced charges that he has surrounded himself with a small band of American acolytes, who have prevented him hearing a wider range of advice from experience bank staff.

Last September, Hilary Benn, Britain’s International Development Secretary, threatened to withhold $50 million of UK funding for the bank in protest over Mr Wolfowitz’s policies on corruption and the conditions for bank lending to poor countries.

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