The board of the World Bank was last night reported to be negotiating the terms of Paul Wolfowitz's departure as president, following a damning report on his negotiation of a compensation package for his girlfriend, bank employee Shaha Riza.

As European governments became more outspoken in their demands for Mr Wolfowitz to go, the US representative on the bank's board, Eli Whitney Debevoise, was discussing with other board members a formula to allow the bank president to leave with dignity.

German development minister Heidemarie Wieczorek-Zeul yesterday repeated that Mr Wolfowitz should quit in order to restore the credibility of the bank.

Asked if Mr Wolfowitz would attend a forum on Africa in Berlin on May 21st/22nd, she said: "I would advise him not to do so."

As the US failed to persuade other major industrialised countries to back Mr Wolfowitz, Ms Wieczorek-Zeul said that his continued presence at the bank was damaging the institution.

"He would do the bank and himself a great service if he resigned. It would be the best thing for all concerned," she said.

The White House maintained its public support for Mr Wolfowitz, stating that, although he made mistakes in handling Ms Riza's transfer to the state department, they did not amount to a firing offence.

A panel charged with investigating his actions said Mr Wolfowitz broke bank rules when he intervened to secure a 36 per cent pay increase for Ms Riza after the bank's ethics committee told him she should not work at the institution while he was president.

Responding to the panel's report, Mr Wolfowitz said he believed he was acting in the bank's best interests when he negotiated the pay deal and promised to improve the way he runs the agency.

A former US deputy defence secretary, Mr Wolfowitz conceded he had relied "much too long" on advisers recruited from the Bush administration and promised to put more trust in bank vice-presidents.

"It is quite apparent that this matter has ceased to have much to do with the case itself - and everything to do with issues about my management style and my policy choices," he said.

Denmark's development minister, Ulla Tornaes, said yesterday that it was difficult to see how Mr Wolfowitz could remain at the World Bank any longer.