Paul Wolfowitz, the embattled American president of the World Bank, the world's biggest economic development institution, is still fighting to retain his job amid staff protests about alleged favoritism concerning his girlfriend. VOA's Barry Wood reports.

The bank's 24-member executive board met late into the night Thursday debating what to do. Unable to reach a conclusion, the board is setting up a committee to make recommendations about Wolfowitz's future. Ultimately, say those close to the situation, the decision to retain or dismiss him will be made by member governments. His term runs another three years.

The controversy involves Wolfowitz's role in greatly boosting the salary of a bank employee with whom he is romantically involved. Last week, Wolfowitz apologized for his actions. Though he says he intends to stay, he also says he will abide by the recommendations of the executive board.

Alison Cave, an economist who heads the bank's staff association, is adamant that Wolfowitz resign. She says he has sacrificed his moral authority and lost credibility with the staff. "At this point I don't think there is anything he can do (to regain his authority). I think it is not so much about the incident itself, but the way he has handled it since the information came to light," she said.

After initially downplaying his role, last week Wolfowitz ordered the release of all documents concerning his girlfriend, Shaha Riza, a North African-born Arab who was on the staff of the Bank when he joined it in 2005. But shortly afterward Riza was re-assigned to the U.S. State Department to avert a potential conflict of interest.

Robert Holland, until recently the U.S. representative at the World Bank, believes the controversy has little to do with the pay of Shaha Riza, which was increased from around $130,000 to more than $190,000.

The real issue, Holland says, is resentment against Wolfowitz for his role in planning the Iraq war while he was the number two man at the Pentagon. Holland says Wolfowitz is unlikely to survive if the Europeans begin to withhold contributions to the bank's international development association, the IDA, which makes grants to the poorest countries.

"If the board, and more importantly the shareholders who give the board direction, determine that too much damage has been done to the institution in terms of likely contributions to the next IDA replenishment round, that will be what determines (his fate), I believe. I think it would be a mistake for the U.S. going forward (to continue to back him) if he is railroaded out of the institution," he said.

Thus far the Bush administration is standing behind Wolfowitz, the tenth American in a row to head the World Bank since it was founded in 1945. European governments are reportedly divided, with the Germans and British favoring his resignation. One of Wolfowitz's top aides has joined the ranks of those recommending that he resign.