Bush Expresses 'regret' Over Wolfowitz Saga

Members of the World Bank's governing board are negotiating directly with Paul Wolfowitz's lawyers in a bid to terminate his reign as president and end the increasingly bitter controversy.

The two sides remain deadlocked over Mr Wolfowitz's demand that he be cleared of having broken bank rules in arranging a large pay rise for his girlfriend when he became president of the bank in 2005.

As George Bush made valedictory comments about the embattled bank president at his White House press conference today, speculation continued that Mr Wolfowitz's tenure would soon be over.

Asked if it was possible for Mr Wolfowitz to continue to lead the bank, Mr Bush replied: "I regret that it's come to this."

Mr Bush paid tribute to Mr Wolfowitz, speaking in the past tense, saying: "I particularly admired his focus on helping the poor." He added: ""All I can tell you is Paul Wolfowitz has an interest in what's best for the bank."

But Mr Wolfowitz has so far refused to go gracefully, despite having been found in a bank report to have engineered and concealed from senior staff the generous pay and promotion deal he ordered for his girlfriend Shaha Riza, a World Bank staff member.

European ministers were critical of Mr Wolfowitz's refusal to step down. Ulla Tornaes, Denmark's minister for development, told the Associated Press: "It's hard to see that he'll be able to stay because the report is very damaging to somebody in his position."

"I have serious difficulties in seeing him staying on," she said.

The mood on the executive board has hardened because of Mr Wolfowitz's aggressive tactics, with several members said to be angry over comments on Wednesday by Robert Bennett, Mr Wolfowitz's lawyer, saying: "Mr Wolfowitz will not resign under this ethical cloud and he will rather put this matter to a full vote."

Mr Wolfowitz's representatives have been talking with members of the executive board, including the UK's representative, who reported back to the board this afternoon to consider how to continue.

The board's mood will not have been improved by what appears to be a campaign against critics by Mr Wolfowitz's camp. The Wall Street Journal's opinion and editorial pages, Mr Wolfowitz's last remaining media supporter, today carried unsubstantiated allegations that Tom Scholar, the UK Treasury's representative at the bank, had aided the career of a bank staff member with whom he was in a relationship.

Mr Scholar denied the allegations, saying: "I am not the supervisor of my partner, either directly or indirectly. We have never come into professional contact, and I have made arrangements to avoid any possibility of professional contact. Since I am not a member of staff or management, I could never be involved in any individual personnel decision affecting her."

Another attack was carried in Tuesday's issue of the Wall Street Journal, which ran an editorial on a report that Hilary Benn - the UK's development minister and a critic of Mr Wolfowitz - held shares in a company with a miniscule £2,000 contract with the Department for International Development.

The appearance of the attacks matches the retaliation that Mr Wolfowitz threatened when the facts about Mr Wolfowitz's arrangements for his girlfriend, Shaha Riza, began to emerge.

In testimony to the internal investigation, Xavier Coll, the head of the bank's human resources division, reported that Mr Wolfowitz had told him: "If they fuck with me or Shaha, I have enough on them to fuck them too."