Germany Slams Wolfowitz

"He (Wolfowitz) would do the bank and himself a great service if he resigned," Wieczorek-Zeul told journalists on Wednesday in Berlin. "That would be the best thing for everybody involved."

Should he fail to quit his post, she advised him not to take part in a two-day World Bank forum on development aid for Africa which starts Monday in the German capital.

"I would not advise him to (take part) if he's still in office," she said, referring to Wolfowitz.

An internal World Bank report found Wolfowitz broke ethics rules and triggered a leadership crisis at the bank by arranging a hefty pay raise for his girlfriend Shaha Riza, a former World Bank employee, when she transferred to the US State Department.

Wolfowitz, who is the former US deputy defense secretary, remained defiant on Tuesday as he appeared before the 24-nation World Bank board. He denied he broke ethics rules in arranging a hefty pay raise for his girlfriend after becoming the bank's president in June 2005.

"I respectfully submit, to criticize my actions or to find them as a basis for a loss of confidence would be grossly unfair and would be contrary to the evidence we have presented to you," Wolfowitz said in a statement to the board.

"Rather than fix blame for something that wasn't wrong, we
should all acknowledge our responsibility as I have acknowledged
mine," he said, conceding he made mistakes.

Wolfowitz's lawyer Robert Bennett told reporters: "We presented to them (the board) overpowering evidence that he (Wolfowitz) acted at all times in the best interests of the bank and in good faith."

The board was expected to deliberate Wednesday, extending an impasse that has pitted European governments outspokenly critical of Wolfowitz against US President George W Bush, who tapped the co- architect of the Iraq war to head the World Bank in 2005.

European nations decline to support Wolfowitz

Key European nations including France, Germany and the Netherlands have declined to support Wolfowitz since the furor reached a fever pitch last month.

The European Commission has said it is worried about the impact of the allegations on the World Bank's credibility as a key partner for European development actions in Africa and other parts of the world.

"A strong World Bank president is needed to mobilize the money," Wieczorek-Zeul said after talks with European Union counterparts in Brussels on Tuesday. "We development-aid ministers know how to speak diplomatically and still get our message across."

"What we hope is that the integrity and the credibility of the bank can be preserved, that is to say re-established," Wieczorek-Zeul said, stressing that she was speaking on behalf of all EU development ministers who met for talks in Brussels.

A shift in the White House?

But the White House signaled a shift Tuesday that may point the way toward a settlement between the bank and Wolfowitz, who has vowed not to quit under "bogus charges" that he acted unethically.

Comments by US officials suggested that a deal could involve the board closing the ethics inquiry without demanding Wolfowitz's resignation.

Instead, the bank would open a broad review to decide whether Wolfowitz is still fit to lead the 185-nation development agency.

"At some point in the future there are going to be conversations about the proper stewardship of the World Bank," Bush's chief spokesman Tony Snow said on Tuesday. "In that sense ... all options are on the table."

He refused to speculate whether that includes Wolfowitz's removal at a later date.Wolfowitz "made mistakes" in handling his companion's promotion, but these were not "firing offences," Snow said.

A highly critical report

Pressure mounted for Wolfowitz to quit after the bank's investigating panel on Monday issued a highly critical, 52-page report.

The panel expressed concern that the scandal had hurt the bank's reputation, hampered its mission of fighting poverty and disease and undermined a global anti-corruption drive that Wolfowitz has made the hallmark of his tenure.

"Mr Wolfowitz saw himself as the outsider to whom the established rules and standards did not apply," it said. "It evidences questionable judgment and a preoccupation with self interest over institutional best interest."

European governments have led the public campaign to oust Wolfowitz, who has made widespread foes among bank staff and senior managers.

The US, which has chosen every World Bank president since the lender's founding in 1944, has stood by Bush's nominee.