World Bank hears Wolfowitz case

World Bank President Paul Wolfowitz has met the bank's 24-member board to respond to allegations of favouritism.

Mr Wolfowitz is under pressure to go after a panel said he had broken the bank's code of conduct by helping secure a pay rise for his girlfriend.

He told the board their decision would affect how the US and the world viewed the World Bank.

The board has the power to dismiss Mr Wolfowitz, and will meet again on Wednesday to consider his fate.

"You still have the opportunity to avoid long-term damage by resolving this matter in a fair and equitable way that recognises that we all tried to do the right thing," Mr Wolfowitz said, according to a statement released by his lawyers.

Earlier on Tuesday, the White House said it still supported Mr Wolfowitz, but added that all options were still open.

I think his performance justifies the full support he has from leadership in the White House. "We've made clear that we support Paul Wolfowitz," said spokesman Tony Snow, adding that the bank's "best interests" also had to be served.

After the hearing in Washington Mr Wolfowitz's lawyer Robert Bennett said: "We presented to them overpowering evidence that he acted at all times in the interests of the bank and in good faith."

He added that his client's performance justified "the full support he has from leadership in the White House".

However the Reuter news agency quoted an unnamed European source as saying the US had failed to win the support of key allies in the group of seven leading industrialised nations (G7).

"Japan was aligned with the United States, but others, including Canada, were against Wolfowitz continuing," the source said following a conference call of G7 officials. The G7 also includes Italy, France, Germany and Britain. On Monday, a panel of World Bank executives said Mr Wolfowitz provoked a "conflict of interest" at the bank by breaking its code of conduct and violating the terms of his contract.

Mr Wolfowitz has faced calls for him to step down since details emerged about his role in securing a pay rise for his partner, Shaha Riza, who used to work at the bank.

Mr Snow told journalists at the White House that Mr Wolfowitz agreed "a lot of mistakes were made" in the process, but they were not a "firing offence".

When Mr Wolfowitz was appointed president of the World Bank in 2005, Ms Riza was transferred to work for the US state department, to avoid any conflict of interest.

But her salary rose quickly to about $193,000 (Å“98,000) - more than the $186,000 that Secretary of State Condoleezza Rice receives before tax.

The World Bank has since been investigating the extent of Mr Wolfowitz's role in securing the pay increase.

BBC NEWS