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Wolfowitz negotiating his resignation, official says

Paul D. Wolfowitz, World Bank president, reportedly wants the bank to accept some responsibility for a pay package scandal. (NICHOLAS KAMM/AFP/Getty Images)

WASHINGTON -- Paul D. Wolfowitz, the embattled World Bank president, is negotiating an agreement to resign, according to an official familiar with the talks.

His departure would include an acknowledgment from the bank that he doesn't bear sole responsibility for the controversy surrounding a generous pay package for his girlfriend, the official said.

The negotiations took place as the bank's board deliberated Wolfowitz's fate yesterday afternoon.

The official said Wolfowitz wanted the bank to accept some responsibility for conflicts of interest that a special bank panel cited against him . The official spoke on the condition of anonymity because of the delicate state of negotiations at the bank, which uses loans and grants to fight poverty around the world.

It was not clear whether the bank's 24-member board would accept Wolfowitz's terms. It is up to the board to decide what action should be taken in the matter.

Pressure on Wolfowitz to resign has grown since the bank panel report, released Monday, regarding his handling of the 2005 pay package of bank employee Shaha Riza.

Wolfowitz has maintained that he acted in good faith.

The bank panel said the board must consider whether Wolfowitz "will be able to provide the leadership" to ensure that the bank achieves its mission of fighting poverty around the world.

The 185-nation World Bank provides more than $20 billion a year for projects -- such as building dams and roads, bolstering education, and fighting disease. It was created in 1945 to rebuild Europe after World War II and has evolved into a major development organization. A centerpiece program provides interest-free loans to the world's poorest countries.

Before taking over the bank nearly two years ago, Wolfowitz was the number two official at the Pentagon and played a lead role in mapping out the war in Iraq.

The White House, which picked Wolfowitz for the World Bank post, on Tuesday indicated for the first time that it was willing to consider new leadership. By tradition, the bank has been run by an American, with the approval of the bank's board. The bank's sister agency, the International Monetary Fund, is headed by a European. The United States, the bank's biggest financial contributor, keenly wants to keep that decades-old tradition intact.

Wolfowitz canceled a trip to a bank-sponsored development conference in Bled, Slovenia, for today and tomorrow.

In a last-ditch plea to save his job, Wolfowitz appeared before the board Tuesday. "You still have the opportunity to avoid long-term damage by resolving this matter in a fair and equitable way that recognizes that we all tried to do the right thing, however imperfectly we went about it," he told the board.

Riza worked for the bank before Wolfowitz took over as president in June 2005. She was moved to the State Department to avoid a conflict of interest, but stayed on the bank's payroll. Her salary went from about $133,000 to $180,000. With subsequent raises, it eventually rose to $193,590. The panel concluded that the salary increase Riza received "at Mr. Wolfowitz's direction was in excess of the range" allowed under bank rules.

The panel said that Wolfowitz "placed himself in a conflict-of-interest situation" when he became involved in the terms and details of Riza's assignment and pay package and that "he should have withdrawn from any decision-making in the matter."

The panel acknowledged, however, that the informal advice Wolfowitz received from the bank's ethics committee "was not a model of clarity."

European members -- led by France, Germany, and the Netherlands -- are pushing for Wolfowitz to resign.

German media quoted Development Minister Heidemarie Wieczorek-Zeul as saying earlier yesterday that Wolfowitz "would do the bank and himself a great service if he resigned. "

The controversy, which has gripped the bank for a month, has threatened to tarnish the poverty-fighting institution's reputation and hobble its ability to persuade countries around the world to contribute billions of dollars.

"This has certainly been a bruising episode for the bank, and what you have to do is figure out a way forward to maintain the integrity of the institution," White House press secretary Tony Snow said yesterday.

Treasury Secretary Henry M. Paulson Jr. and Secretary of State Condoleezza Rice have said the conflict-of-interest allegations against Wolfowitz were not grounds for him to be fired.