WASHINGTON - Paul Wolfowitz encountered stiffening opposition Saturday to staying on as World Bank president amid allegations he showed favoritism in arranging a promotion and pay package for his girlfriend.

World Bank President Paul Wolfowitz appears at a news conference in Washington in this April 15, 2007, file photo. [AP]

European countries led by Germany and France want Wolfowitz to step down, while support for the embattled president has eroded in Nordic nations and elsewhere, according to bank officials and others close to the situation.

A special bank panel is investigating whether Wolfowitz violated bank rules in his handling of the 2005 promotion of bank employee Shaha Riza to a high-paying State Department job.

The World Bank's 24-member board will decide what action, if any, to take; a decision is expected this week. The board could ask him to resign, signal it does not have confidence in his leadership, reprimand him or take no action.

Critics, including World Bank staff, former bank officials, the European Parliament, aid groups and some Democrats say the controversy has damaged the development institution's reputation and may hobble its ability to fight global poverty. They are pressing Wolfowitz to step down on his own.

Wolfowitz has said he made a mistake, and he has apologized. He plans to make his case before the special panel on Monday.

His attorney, Robert Bennett, said Saturday that Wolfowitz "has no intention of resigning under this cloud." Bennett said that when Wolfowitz personally addresses the special panel on Monday, "We are going to be presenting powerful evidence that Mr. Wolfowitz acted in good faith."

The panel, which is make recommendations to the board, is said to be finalizing its work.

"We have full confidence in Paul Wolfowitz and expect that he will be able to work with the World Bank to resolve these issues," White House spokesman Tony Fratto said Saturday.

The Washington Post, citing unnamed sources, reported Saturday that the panel concluded that Wolfowitz breached ethics rules by arranging the compensation package for Riza. The panel was considering whether to explicitly recommend that Wolfowitz resign, according to the report.

World Bank spokespeople and other bank officials could neither confirm nor deny the report.

Bennett said he had not seen any findings from the special panel, and expressed outrage at the World Bank's handling of the case.

"The whole process is a sham," Bennett said. "They have differences with him on policies and management style. Instead of dealing with those, they are creating this phony conflict-of-interest crisis."

The United States, the bank's largest shareholder, continues to stand by Wolfowitz. By tradition, the World Bank has been led by an American. President Bush tapped Wolfowitz and the bank's board approved the selection despite complaints from Europeans about Wolfowitz's role in the Iraq war.

Before joining the bank in June 2005, Wolfowitz was the No. 2 official at the Pentagon and played a main role in mapping out the U.S.-led war in Iraq.

The matter at hand that has Wolfowitz fighting to keep his World Bank job involves whether he violated bank rules in his handling of the 2005 promotion and pay package for Riza.

She already worked at the bank when Wolfowitz took the job. She was assigned duties outside the bank to avoid a conflict of interest, although she remained on the bank's payroll. Riza had earned close to $133,000 as a communications adviser in the bank's Middle East department. After the assignment change, she was getting paid $193,590.

The terms and conditions of the package, however, had not been "commented on, reviewed or approved" by the World Bank's ethics committee, its chairman or the bank's board, according to the bank's executive directors.

Riza also is expected to appear before the special bank panel on Monday. A message left with her lawyer was not immediately returned.