WASHINGTON - The fate of World Bank President Paul Wolfowitz overshadowed meetings of global finance chiefs on Saturday, as Britain said his actions had damaged the bank and critics stepped up calls for him to quit.

World Bank President Paul Wolfowitz speaks at a news conference at the International Monetary Fund headquarters building in Washington April 12, 2007. Wolfowitz said on Thursday he made 'a mistake for which I am sorry' over his handling of the promotion and pay increase of a staff member, Shaha Riza, whom he is dating. [AP]

As the spring meetings of the International Monetary Fund and the World Bank kicked off, Bank staff and anti-poverty activists prepared to stage a protest calling for the resignation of Wolfowitz over his role in the promotion of his girlfriend, Shaha Riza, for which he has apologized.

Britain, the bank's second largest shareholder after the United States, said that the scandal had damaged the institution and that a decision on his fate should now lie with the bank's board.

"While this whole business has damaged the bank and should not have happened, we should respect the board's process," British development minister Hilary Benn said in a statement.

"I am sure these views will be shared by other governors who will also be considering their responses."

German development minister Heidemarie Wieczorek-Zeul said Wolfowitz should decide if he still has the credibility to lead the institution, which spends around $25 billion annually to fight poverty and aid development in the developing world.

"For me the most important thing is that the moral authority and the financial stability of the World Bank must not be harmed," Wieczorek-Zeul told Reuters.

"He himself has to decide whether he still has the credibility to represent the position of the World Bank," she added.

While bank member countries cautioned not to judge Wolfowitz until a closer examination by the bank's board of the issue is completed, bank staff and development groups stepped up questions over what they called his "double standards" on governance and fighting corruption.

"The board must act quickly if it wants to restore confidence in this institution," said Amy Gray of international development group ActionAid. "With Wolfowitz, the World Bank is losing face. If it wants its policies on corruption to be taken seriously, it must first look within."

The scandal has revived antagonism over Wolfowitz's appointment to the World Bank in mid-2005 by the U.S. administration and lingering resentment over his role in the U.S. invasion of Iraq while he was deputy defense secretary.

Senior U.S. administration and Treasury officials rallied to Wolfowitz's defense on Friday and praised his work at the bank, but did not go as far as to say they would use their weight on the board to sway a decision.

AND, ON THE ECONOMY...

As the scandal threatened to dominate the meeting, finance ministers expressed optimism that the world economy would be able to withstand a slowdown in the United States.

"Expectations of continued solid economic growth and fading inflation concerns have contributed to buoyant global financial market conditions," International Monetary Fund chief Rodrigo Rato told the fund's policy setting committee.

Ministers called for action to address global distortions that have led to large U.S. deficits as opposed to massive surpluses in Asia and in oil producing countries.

Statements on imbalances by five major economic players -- the United States, China, Japan, Saudi Arabia and European nations -- are expected when the meetings wrap up.

"There are signs that global current account imbalances are stabilizing, since over the past year market and macroeconomic developments have been moving in the right direction," said Joaquin Almunia, Commissioner, European Commission.

The statements are expected to include commitments by all of the countries, which have participated in year-long talks with the IMF, on policies to rebalance the economy.

China is expected to commit to increasing the flexibility of its exchange rate regime against a basket of currencies, including the dollar and euro, IMF and G7 sources said.

Such a commitment should ease tensions in Washington where many lawmakers say that China is deliberately suppressing the value of its currency, the renminbi, to keep its export cheap.