The World Bank's board was setting out its terms for Paul Wolfowitz's resignation as president last night so as to avoid any decision to fire him after a damning report on his negotiation of a compensation package for his girlfriend, bank employee Shaha Riza.

There was no certainty, however, that Mr Wolfowitz would accept such an offer.

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 a formula to allow him to leave with dignity.

German development minister Heidemarie Wieczorek-Zeul insisted that Mr Wolfowitz should quit in order to restore the bank's credibility. 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 it. "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.

President George Bush, however, told reporters: "I regret that it has come to this. I admire Paul Wolfowitz. I admire his heart and I particarly admire his focus on the poor.

"I know Paul has an interest in working for the bank and making sure it focuses on things that matter. I applaud his vision and respect him a lot. I regret this."

A panel investigating Mr Wolfowitz's actions said that he 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 there while he was president.

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.

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.