WASHINGTON (Reuters) - World Bank President Paul Wolfowitz admitted on Thursday he made a mistake and apologized for his handling of the promotion and pay increase of his girlfriend and staffer Shaha Riza.

“I proposed to the board that they establish some mechanism to judge whether the agreement reached was a reasonable outcome,” Wolfowitz said in a statement he read at a news conference before upcoming meetings of finance ministers in Washington this weekend.

“I will accept any remedies they propose,” he added.

Wolfowitz defended his actions to send Riza on an external assignment to the U.S. State Department soon after he joined the bank in 2005, saying he was in “uncharted waters” in his new job.

“In hindsight, I wish I had trusted my original instincts and kept myself out of the negotiations. I made a mistake, for which I am sorry,” he said.

The bank’s board, which includes government representatives from the bank’s 185 member countries, was meeting on the matter on Thursday. After an adjournment, the board resumed their meeting focusing on whether Wolfowitz bent the rules on Riza’s promotion and violated staff rules.

But the World Bank’s employee representative group called for Wolfowitz to resign during a staff meeting at the bank.

“The president must acknowledge that his conduct has compromised the integrity and effectiveness of the World Bank Group and has destroyed the staff’s trust in his leadership,” according to written remarks presented at the meeting by staff association chair Alison Cave and obtained by Reuters.

“He must act honorably and resign,” she said.

Cave said it seemed impossible for the institution, whose mission is to fight global poverty, to move forward “with any sense of purpose under the present leadership.”

WOLFOWITZ AT STAFF MEETING

Witnesses said Wolfowitz came to the meeting and tried to defend his actions.

The controversy spilled into the open last week when the staff association questioned the promotion and pay increase of Riza, prompting an investigation by the board.

World bank President Paul Wolfowitz listens to a journalist in Johannesburg March 15, 2007. Wolfowitz on Thursday said he made "a mistake for which I am sorry" over his handling of a promotion and pay increase for a staff member, Shaha Riza, whom he is dating. REUTERS/Siphiwe Sibeko

Wolfowitz, who was nominated by President George W. Bush, joined the bank after serving as deputy defense secretary at the Pentagon, where he was one of the chief architects of the U.S. war strategy in Iraq.

Lingering distrust among many staff members and resentment over his close ties to the Bush administration and his role in the Iraq war has overshadowed his first two years at the bank.

“For those people who disagree with the things that they associate me with in my previous job -- I’m not in my previous job,” Wolfowitz said. “I’m not working for the U.S. government.”

The White House, which nominated Wolfowitz for the job in 2005, reiterated its support for him.

“In dealing with this issue he has taken full responsibility and is working with the executive board to resolve it,” White House spokesman Tony Fratto told Reuters.

Development group Oxfam said in a statement such controversies could be avoided if the choice of World Bank president was not a U.S. political appointment.

Wolfowitz said that when he joined the bank he told the board about his relationship with Riza to address potential conflict of interest issues. He said he took the advice of the board’s ethics committee to relocate Riza, a former senior communications officer in the Middle East Department.