The Department of Finance said yesterday it would not comment on the controversy surrounding World Bank president Paul Wolfowitz as the European Commission expressed hope it would not hit plans to boost co-operation between the two key aid bodies.

Mr Wolfowitz has said he will not stand down over a promotion he approved for his girlfriend despite increasing fears among member governments of the bank that the affair is hurting its image as an agency that is tough on corruption.

"We are concerned about the institution, we are concerned about these allegations and of course we are monitoring this," a spokesman for EU Aid Commission Louis Michel said.

"We hope this will be dealt with in the proper way. We hope also it won't affect a co-operation that is increasing and which is crucial in particular for developing countries and more in particular for Africa," he said.

A spokesman for the Department of Finance, which is responsible for Ireland's membership of the World Bank and the International Monetary Fund, said there would be no comment at this stage. He said Ireland was a member of a "constituency" that included Canada and the Caribbean and that no comment had been made by the group.

Debt and Development Coalition Ireland yesterday said Mr Wolfowitz should leave his post.

Speaking from Washington, Nessa Ní Chasaide, co-ordinator of the coalition, said by failing to demand the resignation of Mr Wolfowitz, the development committee of the World Bank had further eroded the credibility of the bank as an organisation that is meant to serve the needs of impoverished people.

"As a member of the World Bank, the Irish Government is implicated in this failure and we call on the Minister for Finance to urgently clarify the position of the Irish Government on this matter," she said.

Ms Ní Chasaide said the issue highlighted the fundamental lack of democracy and transparency at the World Bank.

"We call on the Irish Government to support reform of the leadership selection process and to fight for more fundamental reform at the bank by ending the damaging conditions attached to World Bank loans and aid which have had such detrimental impacts on the lives of impoverished people."

The coalition was established in 1993 by a number of development, environment, missionary and solidarity groups in Ireland concerned about the effects of debt on developing countries.

EU Aid Commission spokesman Mr Michel had just had meetings with Mr Wolfowitz in Washington and had reaffirmed plans for the two bodies to examine how their activities could be better co-ordinated to deliver greater and more efficient aid. The EU calls itself the world's biggest international aid donor, with its 27 member states providing total assistance of some €44 billion in 2005 and the EU Commission contributing a further €7.4 billion of EU funds.

Mr Wolfowitz has come under fire for the high-paying promotion he agreed for his girlfriend, bank employee Shaha Riza, before she was assigned to work at the US State Department.

A number of European countries have raised concerns about the affair but none has publicly called for the dismissal of Mr Wolfowitz, who has backing from within the Bush administration.- (Additional reporting by Reuters)