"The economic situation has become distinctly less favorable" since the summer, the Fed chief told the House Financial Services Committee, a sign markets took to be evidence of yet more interest rate cuts by the U.S. central bank which pushed the euro higher.

Lower interest rates can jump-start a nation's economy, but may weigh on its currency as traders transfer funds to countries where they can earn higher returns.

Shortly after his testimony, the euro surged to a record $1.5105 before falling back slightly to $1.5043 in afternoon trading, from the $1.4967 it bought in late trading Tuesday in New York.

The surging euro makes it more expensive for Americans visiting Europe, but makes U.S. shopping more appealing to Europeans.

Since Bernanke's last such assessment last summer, the housing slump has worsened, credit problems have intensified and the job market has deteriorated. Bernanke said that the confluence of these factors has turned people and businesses alike toward a more cautious attitude toward spending and investment.

This, he said, has further weakened the economy.

That is in contrast to Europe where, despite the roaring euro, growth is still on track, albeit slightly slower, and markets are optimistic that should the U.S. go into recession, the continent would be able to weather any such slowdowns.

The European Central Bank, which has left its own rates unchanged since last summer, is expected to keep them at 4 percent when it meets next week.

McNabb, 50, has been with Vanguard since 1986. He currently serves as a managing director overseeing Vanguard's institutional and international businesses, with about $700 billion in assets under management.

He will begin his role as president and director on March 1 and will succeed chief executive officer John Brennan within a year.

Brennan, 53, has served at Vanguard as president since 1989 and CEO since 1996. He will remain board chairman.

Valley Forge-based Vanguard manages $1.25 trillion in mutual fund assets, including more than $350 billion in employer-sponsored retirement plans.

A Braunschweig court sentenced Klaus Volkert, 48, to two years and nine months in prison for his role in arranging illegally, among other things, trips abroad and prostitutes for employee representatives.

The court also convicted ex-manager Klaus-Joachim Gebauer on 40 counts of breach of trust. Gebauer was handed a suspended one-year sentence.

Volkert's attorney had argued that he should be cleared of all 48 counts of breach of trust against him.

Volkert testified that he helped arrange a lucrative contract for his former girlfriend, but denied that he had done anything wrong.

Gebauer had testified that he always acted on behalf of superiors and management, but acknowledged that the indictment against him was "largely accurate."

Allianz, Europe's biggest insurer by gross premiums and the owner of Dresdner Bank AG, said it earned 665 million euros ($974.62 million) in the October-December period, down by more than half from nearly 1.4 billion euros a year earlier. The company blamed the slip on a bad quarter for Dresdner.

Revenue rose 4 percent gain to 25.9 billion euros ($37.9 billion) in the fourth quarter compared with 24.8 billion euros in the same quarter a year earlier.

Allianz shares rose 3 percent to 121.03 euros ($177.38) in Frankfort.

Allianz's U.S. units include Bill Gross' Pimco, one of the world's largest bond managers; Fireman's Fund; Oppenheimer Capital; and fund managers Nicholas-Applegate and RCM Capital.

For the year, the company confirmed its preliminary figures released last month, earning 8 billion euros ($11.7 billion), up 13 percent from 7 billion euros it earned in 2006. Revenue also rose to 102.6 billion euros ($150.4 billion) in 2007 compared with 101.1 billion euros in 2006.

"Despite challenging conditions in 2007, we were able to further improve our operating efficiency and profitable growth, and to achieve a record result for the year," said chief executive Michael Diekmann.

He said the results, despite the fourth-quarter narrowing, came because of "the well-diversified business activities of the group" which meant "we were less vulnerable to shocks and cycles in individual markets and segments."

Though the company's core insurance operations, including health and life insurance, as well as property and casualty insurance, were improved, the overall results were pulled lower by Dresdner, Germany's third-biggest bank, and its investment banking arm, Dresdner Kleinwort.

For the year, the bank's operating profit came in at 730 million euros ($1 billion), or about half the 1.4 billion euros it earned in 2006.

British Airways and Virgin Atlantic have agreed to pay out a total of £102m to customers who were overcharged by the airlines between August 2004 and March 2006.

The airlines have agreed to a settlement with class action specialists Cohen Milstein Hausfield & Toll in a deal that now has to be ratified by the US courts.

Ripped-off customers who paid over the odds for fuel surcharges will be able to claim back between £1 and £11.50 per long-haul flight from British Airways and between £2 and £10 from Virgin.

Last year British Airways was fined £270m by UK and US competitions authorities for price fixing collusion while Virgin, though admitting complicity in the price fixing, escaped a fine after blowing the whistle on the practice.

A senior partner at Cohen Milstein said: “Customers in the UK should claim back what was unlawfully taken from them in order to demonstrate that such behaviour is unacceptable.”

The company said it won a 1.15 billion dollar contract to build two semi-submersible floating drilling rigs by September 2010 for an unidentified Russian client.

Separately, clients in Africa and in the Americas ordered two oil drilling ships worth 1.26 billion dollars which will be delivered by May 2011, it said.

South Korea, home to seven of the world's top 10 shipyards, clinched record orders last year because of strong demand for crude carriers and offshore exploration equipment as oil prices remained high.

The trend continued in the first six months of this year, when local shipbuilders secured a record 33.2 billion dollars' worth of orders -- up 51.3 percent from a year earlier.