Wolfowitz refuses to quit Bank, wants name cleared

By Lesley Wroughton

WASHINGTON (Reuters) - World Bank President Paul Wolfowitz refused on Wednesday to bow to heavy European pressure to resign as he sought to clear his name in negotiations with the bank's board over a possible exit strategy.

"Mr. Wolfowitz will not resign under this cloud and he will rather put this matter to a full (board) vote than to capitulate on his integrity," his lawyer Robert Bennett told Reuters.

Several European countries have said Wolfowitz should step down to salvage the bank's credibility, which they say has been damaged by his handling of a high-paying promotion for his companion, bank Middle East expert Shaha Riza.

The controversial former deputy U.S. defense secretary and architect of the Iraq war has insisted he acted in good faith on the advice of a board ethics committee in overseeing the promotion of Riza and has said he wants it to acknowledge its own failures.

A board panel found his efforts on her behalf broke bank rules and represented a conflict of interest.

Board sources said talks were launched on Wednesday over how to push the dispute to a close. Some members have suggested a resolution that would recognize the panel's findings and Wolfowitz's efforts to resolve the conflict of interest issues over Riza, but also acknowledge mistakes by the board.

However, the board adjourned until Thursday without a decision.

Under a contract he signed in June 2005 when he became World Bank president, Wolfowitz would receive a year's salary, or around $375,000, if his service were terminated by the board or if he resigned.

PRESSURE TO RESIGN

Pressure to resign intensified on Wednesday as European countries signaled they would resist a bid by the United States to keep Wolfowitz in the job.

Wolfowitz had been scheduled to attend a meeting of the Group of Eight finance ministers in Germany this weekend.

But German Development Minister Heidemarie Wieczorek-Zeul said Wolfowitz was not welcome to take part in a two-day World Bank forum on development aid for Africa that starts on Monday in Berlin.

"He would do the bank and himself a great service if he resigned," Wieczorek-Zeul, one of Wolfowitz's strongest critics, told reporters in Berlin.

"It would be the best thing for all concerned."

European countries have had misgivings about Wolfowitz since his nomination by President George W. Bush in 2005, at the height of bitter tensions between the White House and Europeans over the U.S. invasion of Iraq.