Euro area GDP fell 0.6 percent in the last three months of 2012, marking the currency bloc's first full year in which no quarter produced growth, extending back to 1995, according to figures from European statistical agency Eurostat. The worse-than-expected decline - the deepest since the first quarter of 2009 - was driven by GDP slumps in the bloc's major economies, including a shock 0.6 percent contraction in Germany and a 0.3 percent fall in French output in the fourth quarter.

Meanwhile in Italy, the next largest eurozone economy, fourth quarter GDP shrunk a more-than-expected 0.9 percent. In Germany, where preliminary data showed the economy still grew on the year, albeit at just 0.1 percent, weak exports from the nation's muscular manufacturing industry were blamed for the sharp fall in output.

In France, Europe's second biggest economy, the fourth quarter GDP contraction obliterated a tentative recovery made in quarter three and signalled that the nation could be lurching back towards recession.

The document is an unprecedented window into the terrorist operation, indicating that al-Qaida predicted the military intervention that would dislodge it in January and recognized its own vulnerability.

The letter also shows a sharp division within al-Qaida's Africa chapter over how quickly and how strictly to apply Islamic law, with its senior commander expressing dismay over the whipping of women and the destruction of Timbuktu's ancient monuments. It moreover leaves no doubt that despite a temporary withdrawal into the desert, al-Qaida plans to operate in the region over the long haul, and is willing to make short-term concessions on ideology to gain the allies it acknowledges it needs.

The more than nine-page document, found by The Associated Press in a building occupied by the Islamic extremists for almost a year, is signed by Abu Musab Abdul Wadud, the nom de guerre of Abdelmalek Droukdel, the senior commander appointed by Osama bin Laden to run al-Qaida's branch in Africa.

The clear-headed, point-by-point assessment resembles a memo from a CEO to his top managers and lays out for his jihadists in Mali what they have done wrong in months past, and what they need to do to correct their behavior in the future.

Papal elections are among the world's most mysterious, with no declared candidates and more bluffing than a high-stakes poker game. No cardinal can openly campaign for a job whose election is said to be inspired by the Holy Spirit. But behind the scenes, at meetings inside the Vatican's thick walls and dinners at the finer Roman restaurants, the cardinal electors size up potential candidates among themselves and drop subtle hints to Vatican watchers in the media about who's up or down.

This round of discreet discussions, dubbed "totopapa" or "pope sweepstakes" by irreverent Romans, was only kicked into a higher gear on Monday when Benedict announced the first papal abdication for centuries. It will go into overdrive when cardinals from around the world arrive in the next few days.

When the most powerful man in the world holds a State of the Union address, as President Barack Obama did on Tuesday evening in Washington, political stakeholders listen closely. They comb through the text, looking for messages in the lines and between them.

This year, however, some of the most attentive listeners were not sitting in the joint Congressional session on Capitol Hill, or even in the US at all. Rather, they were sitting in capital cities across Europe. European Union leaders, Chancellor Angela Merkel and British Prime Minister David Cameron chief among them, were hoping for a clear commitment to the pursuit of a trans-Atlantic free-trade zone. It is an idea the Europeans threw their support behind at the last EU summit in Brussels.

And Obama didn't disappoint. "Tonight, I'm announcing that we will launch talks on a comprehensive trans-Atlantic trade and investment partnership with the European Union," he said. "Because trade that is fair and free across the Atlantic supports millions of good-paying American jobs."

Finally, the project that has long been cause for euphoria among trans-Atlanticists has received an official seal of approval from the highest level. America and Europe, in different weight classes when it comes to foreign and military policy, are to fight the economic battle in a class of their very own: Super heavyweight.

Kyle Bass writes:

Trillions of dollars of debts will be restructured and millions of financially prudent savers will lose large percentages of their real purchasing power at exactly the wrong time in their lives. Again, the world will not end, but the social fabric of the profligate nations will be stretched and in some cases torn. Sadly, looking back through economic history, all too often war is the manifestation of simple economic entropy played to its logical conclusion. We believe that war is an inevitable consequence of the current global economic situation.

Former Goldman Sachs technical analyst Charles Nenner – who has made some big accurate calls, and counts major hedge funds, banks, brokerage houses, and high net worth individuals as clients – says there will be “a major war starting at the end of 2012 to 2013”, which will drive the Dow to 5,000.

Veteran investor adviser James Dines forecasts a war as epochal as World Wars I and II, starting in the Middle East.

We’re in the middle of a global currency war – ie a situation where nations all compete to devalue their currencies the most in order to boost exports. And Brazilian president-elect Rousseff said in 2010: The last time there was a series of competitive devaluations … it ended in world war two.

Since the 1970s, the US dollar has been the currency that the international community has used to trade oil around the globe. This has created an overwhelming demand for US dollars and US debt. But what happens when the rest of the globe starts rejecting the increasingly unstable US dollar and figures out that gold can be used as a currency in international trade?

The truth is that it doesn't take a lot of imagination to figure that out. Demand for the US dollar and US debt would fall off the map and there would be a rush into gold unlike anything we have ever seen before. So are Russia and China accumulating unprecedented amounts of gold right now because they eventually plan to cut the legs out from under the petrodollar and they want to gobble up huge stockpiles of gold before the cat is out of the bag? Of course they will never admit this publicly, but there are rumblings out there that this is exactly what is happening.

Not that you can really blame any nation that wants to get into gold right now. News outlets all over the globe are telling us that we are in the midst of a "currency war" as central banks all over the planet race to devalue their currencies. So why would anyone want to be in paper in such an environment?

A select group of cardinals then get together in a secretive conclave and a successor is chosen, in a clean break from the past. All that has been turned on its head by Benedict’s surprise resignation, the first in the papacy since 1415. It raises a potential difficulty for the Vatican – that even after his retirement, he could become a lightning rod for dissatisfaction and dissent with his successor, whoever that might be.

When Benedict formally resigns on the evening of February 28, he will be taken probably by helicopter to Castel Gandolfo, the traditional summer retreat of popes, in the hills outside Rome. The 85-year-old is expected to remain there for 15 to 20 days, until the conclave of around 120 cardinals drawn from around the world gathers at the Vatican and elects a new pontiff. Benedict will then take up residence in a cloistered monastery within the Vatican City State. His title at that point? Unclear.

Inevitably he will run into his successor and will still be in daily touch with cardinals and other influential figures within the Holy See. Not only that but, according to the Vatican spokesman, Benedict will continue to write and publish treatises and essays – he is a noted theologian who recently completed a trilogy on the life of Christ. That could produce a situation where the former pope says one thing on an important matter, while his successor says something different.

“Traditionally popes have not resigned because there is this question of what do you do with two popes,” says John Thavis, an American who has covered the Vatican for 30 years and recently wrote an insider’s account of the Holy See – “The Vatican Diaries.” “What should be the role of a former pope – does he have to stay quiet for the rest of his life? What if he speaks up and disagrees with his successor? You then have the prospect of the Church effectively having two popes.”

Meanwhile, the rise of evangelical Churches, especially in Latin America and Africa, is checking the growth of Catholic congregations, which are also threatened in some areas by religious intolerance. Benedict XVI rejected calls for a debate on the issue of clerical celibacy, and reaffirmed the ban on Communion for divorced Catholics who remarry.

Equality laws being debated in several Western countries are a major issue. Benedict XVI has said the Church's strict positions on abortion, euthanasia and homosexuality are "not negotiable", and such outspoken orthodoxy has alienated liberal-minded Catholics. And the next Pope will also have to shore up confidence in an institution that been rocked for several years by the sexual abuse of minors by priests.

The recent leaking of Vatican documents by the Pope's butler have exposed the Church's central government - the Curia - as a seriously dysfunctional institution. It appears to be "riddled with rival factions and there were accusations of corruption in high places", says veteran Vatican analyst Clifford Longley. "The reform of the Vatican, which he only began at the margins, has a long way to go yet," says Mr Longley. "Decentralisation is now imperative. His successor has a huge and unenviable task."

Systems of oversight need to be put in place to ensure corruption is detected and halted, while Vatican financial transactions need to be made more transparent. "The one issue which overshadows all others is the growing pressure on Catholics because of equality laws in the West," says Catholic commentator Austen Ivereigh. Gay marriage legislation in France and the UK, the closure of Catholic adoption agencies in the UK, the battle in US courts between leading Catholic institutions and the State over sexual equality are all serving to have a chilling effect on the Church in the West, he says. "Equality laws such as same-sex marriage make Christians and church organisations vulnerable to lawsuits and anti-discrimination claims."

Ultimately, says Mr Ivereigh, the State could be developing positions through equality legislation that will serve to marginalise Catholics and the presence of the Church in public life. "There is no bigger file in the Pope's inbox," he says.

Cardinal Peter Turkson

A TV star, "people's person" and a "wonderful" priest, the Ghanaian cardinal emerging as a strong favourite for the papacy is described by colleagues in glowing terms. Peter Turkson, who is president of the Vatican's pontifical council for justice and peace, was made a cardinal by Pope John Paul II in 2003 after serving for almost 30 years as an ordained priest.

Cardinal Marc Ouellet

As prefect of the Congregation for Bishops, which oversees the handing out of mitres, the multi-lingual Canadian cardinal Marc Ouellet is one of the most powerful men in the Vatican. The 68-year-old former archbishop of Quebec, who was appointed to the third most important job in the Vatican three years ago, has the power to make or break careers.

Cardinal Francis Arinze

Francis Arinze, who was born in Eziowelle, Nigeria, on 1 November 1932, has long been touted as a possible pope. Although his parents worshipped Ibo deities, Arinze – one of seven children – was sent to an Irish missionary school and soon set his heart on becoming a priest. He was ordained in 1958 and went on to teach liturgy, logic and basic philosophy at Bigard Memorial Seminary at Enugu in south-eastern Nigeria and study at the Institute of Pedagogy in London.

Cardinal Angelo Scola

The election of Angelo Scola as Benedict XVI's successor would delight Italians keen to see one of their own back on the papal throne after Polish and German popes. Scola, the son of a truck driver, was born on 7 November 1941 in Lombardy. Ordained in 1970, he holds doctorates in philosophy and theology and was professor of theological anthropology at the John Paul II Institute for Studies on Marriage and Family.

Cardinal Turkson, who holds one of the most important jobs in the Roman Curia and has been repeatedly promoted by Pope Benedict, was quick to take a conservative line on gay marriage and other "alternative lifestyles". "We need to find ways of dealing with the challenges coming up from society and culture," he said, adding that the Church needed to "evangelise", or convert, those who had embraced "alternative lifestyles, trends or gender issues". He added: "We cannot fail in our task of providing guidance."

Cardinal Turkson has caused controversy in the past both by screening a video claiming that Europe faced being overrun by Muslims and by insisting that condoms were not the solution to preventing HIV. Cardinal Turkson also said the Vatican needs to "restore and repair" an image that has been "badly compromised by recent scandals".

Pope Benedict's eight-year papacy saw controversies over paedophile priests, a tense relationship with the Muslim world, and the conviction of his butler for stealing documents that revealed corruption at the top of the Vatican.

At just before midday local time, an earthquake with a magnitude of 4.9 was detected just north of a site where Pyongyang conducted earlier nuclear tests. The two previous tests, in 2006 and 2009, prompted quakes of 3.6 and 4.5 respectively.

The South Korean defence ministry, which raised its military alert level after the quake, said the blast had an explosive yield of between six and seven kilotons (kt) and was of "enormous destructive power". In comparison, the nuclear weapons detonated above Hiroshima and Nagasaki in 1945 carried estimated yields of 15kt and 22kt respectively.

Unlike Pyongyang's previous nuclear tests, which are understood to involve the testing of plutonium warheads, the most recent underground explosion was to test a uranium device – the same kind of nuclear weapon that intelligence officials believe the Iranians are working on.

Indeed, Iran's nuclear weapons programme bears many striking similarities to the research being undertaken in North Korea. The delivery system for Iran's nuclear device is an advanced form of the Soviet-era Scud missile – just like the North Koreans. And Iranian scientists are working on a project similar to the North Koreans which would enable them to attach a nuclear device comprising enriched uranium to the missiles.

We should not be surprised, though, by the similarities between the two programmes. Both Iran and North Korea have benefited from the expert advice they have received from Dr AQ Khan, the "father" of Pakistan's nuclear bomb, and teams of nuclear scientists regularly shuttle between Tehran and Pyongyang to share their research material.

And the fact that North Korea has been able to detonate three nuclear devices with relative impunity will only serve to encourage Iran that, when the time comes, it will be able to test a device of its own without any unwelcome interference from the West.

Following the successful launch of an indigenous satellite into orbit using a long-range missile in December 2012, the UN Security Council recently tightened sanctions on the DPRK that impose asset freezes and travel bans on individuals involved in state companies and North Korea's space agency. Although talk of Pyongyang conducting a highly controversial nuclear test has been on the cards for months, the DPRK has recently threatened to respond to tightened UN sanctions using “stronger measures” than a nuclear test.

While bellicose rhetoric is to be expected from Pyongyang, recent statements against the United States and South Korea are unusually high on the richter scale of belligerence. "We are not disguising the fact that the various satellites and long-range rockets that we will fire and the high-level nuclear test we will carry out are aimed at the United States," stated North Korea's National Defense Commission.

Data gathered between 2003 and 2009 show the seasonal recharge of the region’s aquifers but then the onset of a potent drought in 2007 followed by a persistent big drop in water amounts, 60 percent of which is ascribed to unsustainable rates of pumping in a study to be published on Friday in the journal Water Resources Research.

Here are some useful excerpts from a joint news release from NASA and the University of California, Irvine:

"Scientists at the University of California, Irvine; NASA’s Goddard Space Flight Center in Greenbelt, Maryland; and the National Center for Atmospheric Research in Boulder, Colorado, found during a seven-year period beginning in 2003 that parts of Turkey, Syria, Iraq and Iran along the Tigris and Euphrates river basins lost 117 million acre feet (144 cubic kilometers) of total stored freshwater. That is almost the amount of water in the Dead Sea. The researchers attribute about 60 percent of the loss to pumping of groundwater from underground reservoirs…."

“Grace data show an alarming rate of decrease in total water storage in the Tigris and Euphrates river basins, which currently have the second fastest rate of groundwater storage loss on Earth, after India,” said Jay Famiglietti, principal investigator of the study and a hydrologist and professor at UC Irvine. “The rate was especially striking after the 2007 drought. Meanwhile, demand for freshwater continues to rise, and the region does not coordinate its water management because of different interpretations of international laws.”