Paul Wolfowitz, the President of the World Bank, was fighting for his job yesterday after being forced to make a humiliating apology for ordering a huge pay rise and a promotion for his girlfriend, an official at the bank.

The board of the World Bank was meeting in Washington yesterday morning to decide the fate of Mr Wolfowitz, the controversial former US Deputy Defence Secretary, after adjourning discussions earlier in the day. There was rising speculation that Mr Wolfowitz could be forced to resign or even be sacked, in what would be an unprecedented move, but some observers felt it to be likelier that he would escape with a severe rebuke.

The World Bank President said that he would “accept any remedies” proposed by the institution’s directors, representing its 185 member countries, after he admitted personal involvement in the pay rise and promotion for Shaha Riza, 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 head of the World Bank at the behest of the White House. Under World Bank rules, staff are banned for working under the direction of a colleague with whom they are romantically involved.

Details emerged of a memorandum from Mr Wolfowitz instructing Xavier Coll, the Bank’s human resources head, over the terms for Ms Riza’s secondment. This led to her being given an exceptional salary rise and enhanced annual pay awards, lifting her earnings to $193,000 (£97,600) a year tax-free — an $61,000 rise overall. The memo also set out arrangements for her promotion.

Yesterday the Bank’s staff association, which claims that the terms of Ms Riza’s assignment broke its rules, called for full release of all documents related to the case. World Bank embarrassment over the disclosures was compounded because Mr Wolfowitz has been criticised by campaigners after pushing good governance and anti-corruption efforts in poor nations to the top 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 . . . My real regret is that I did not more forcefully keep myself out of it.”

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 on how to handle the conflict of interest over his girlfriend’s role.

Mr Wolfowitz said that he had “never volunteered” to become directly involved. He had sought advice because he was concerned over an “unprecedented and exceptional” situation over Ms Riza’s “involuntary reassignment”.

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

Mr Wolfowitz made a plea for understanding, saying: “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.”

Until details of the memo to Mr Coll emerged yesterday, he had complained over media attention to the issue of Ms Riza’s transfer.

Yesterday he tried to refocus attention on the World Bank’s work at a time when it is negotiating with member countries over a new three-year mainstream funding package for its efforts in the developing world. “In the larger scheme of things, we have much more important work to focus on,” he said.

Bank charges

- Appointment of Mr Wolfowitz, a former US Deputy Defence Secretary, as World Bank President provoked controversy, not least among critics of Iraq war

- His reign at the bank has been criticised for heavy emphasis on action against corruption in developing nations

- He has been accused of surrounding himself with American acolytes

- 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

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