Pope Benedict XVI has already appointed a commission of cardinals to investigate the “Vatileaks” scandal. It erupted earlier this year with the publication of leaked memos alleging corruption and mismanagement in Holy See affairs and internal squabbles over its efforts to comply with international anti-money-laundering norms.

The publication Saturday of “His Holiness” by Italian journalist Gianluigi Nuzzi, added fuel to the fire, reproducing confidential letters and memos to and from Pope Benedict and his personal secretary which, according to the Vatican, violated the pope's right to privacy. Vatican spokesman Reverend Federico Lombardi said in a statement Saturday the book was an “objectively defamatory” work that “clearly assumes characters of a criminal act.” He warned the Holy See would get to the bottom of who “stole” the documents, who received them and who published them. He warned the Holy See would seek international cooperation in its quest for justice, presumably with Italian magistrates.

The Vatican had already warned of legal action against Nuzzi after he published letters in January from the former second-highest Vatican administrator to the pope. In those letters the administrator begged not to be transferred for having exposed alleged corruption that cost the Holy See millions of euros in higher contract prices. The prelate, Monsignor Carlo Maria Vigano, is now the Vatican's US ambassador.

Nuzzi, author of Vatican SpA, a 2009 volume laying out shady dealings of the Vatican Bank based on leaked documents, said he was approached by sources inside the Vatican with the trove of new documents. Most of them are of fairly recent vintage and many of them painting the Secretary of State, Cardinal Tarcisio Bertone, in a negative light.

Sheikh Yousef Ideis, head of the Palestinian Territory's Muslim Sharia court, called on Palestinians to flood the Temple Mount on Sunday, which is a highly revered location for both Jews and Muslims, in order to be present should Jewish "fanatics decide to break into it," according to WAFA.

Police in Jerusalem announced this week that the annual Dance of Flags in honor of the national holiday - which marks the capture and unification of Jerusalem following the 1967 Six-Day War - will not pass through east Jerusalem or the Muslim Quarter due to disruptions during last year's march.

The parade, which in 2011 attracted up to 40,000 people and features live music and floats, will snake its way from King George Street in downtown Jeruaslem to Argon to the Old City, remaining in mostly Jewish-populated areas. Last year, 24 people - the majority of them Jewish - were arrested and three wounded by flying rocks as Palestinians and Jews clashed during the parade.

Diplomatic sources said that Mr Hollande plans to: withdraw French troops from Afghanistan long before the British plan to leave; abandon his predecessor Mr Sarkozy’s support for Mr Cameron’s demands to freeze the European Union budget; and push for a Europe-wide financial transaction tax, which will hit the City of London most severely.

Other points on Mr Hollande's agenda include launching a fresh bid to end Britain’s EU budget rebate, won by Margaret Thatcher, and fighting harder to protect France’s Common Agricultural Policy payments.

He plans to promote wider EU defence co-operation, INCLUDING THE PROSPECT OF A EURO ARMY LONG RESISTED BY BRITAIN, and will also argue that EU countries should abandon austerity measures to boost growth. Mr Cameron and Mr Hollande will meet in Washington today ahead of the G8 summit at Camp David and a Nato summit in Chicago this weekend.

News of the nuclear-capable ballistic missile launch broke on the Pakistani-based Geo News Saturday, Pakistan Defense reports. Nasr, the Arabic word for “victory’, is a Battlefield Range Ballistic Missile (BRBM) that uses the solid fuel propellant system. It has an effective operation range of up to 110 miles and is capable of being armed with both nuclear and conventional high-explosive warheads.

The Pakistani military says the next generation system was specially designed to quickly react to a variety of threats. Earlier this month, the Pakistani military announced the launch of the Hatf III Ghaznavi Short-Range Ballistic missile at an annual field training exercise by the Army Strategic Force Command. The Hatf III has a range of 180 miles.

And on April 25th, Pakistan launched a Shaheen-1A intermediate-ranged missile in response to its sworn enemy India’s Agni-V intercontinental ballistic missile (ICBM) test. After a series of four or five more tests, the Agni-V will join India’s military arsenal before 2015. Currently, only the United States, Russia, China, France and the UK possess operational intercontinental ballistic missiles. Fearing India’s increased military capability, the Pakistani Shaheen-1A covered upwards of 2,500 miles when fired over the Indian Ocean last month, making any target within India within striking distance.

The Miami-based center said Alberto was centered about 105 miles (170 kms) southeast of Charleston, South Carolina, at 2 am EDT and moving toward the southwest near 6 mph (9 kph). It added that a tropical storm watch continued for South Carolina from the Savannah River to the South Santee River. Forecasters have advised coastal interests from Georgia to North Carolina's Outer Banks to track the storm, citing the potential for dangerous surf.

The 2 am EDT Sunday advisory said Alberto, meanwhile, was expected to turn toward the west-northwest later in the day and then head to the north and northeast sometime Monday. Little change in strength was forecast over the coming 48 hours, the center added, noting the maximum sustained winds were at 50 mph (85 kph) with higher gusts. Forecasters added that tropical storm force winds extended about 45 miles (75 km) out from the center of Alberto.

The officials say the three victims died when the buildings they were working in overnight collapsed. Italian TV showed damaged factories and church steeples in the region. Aftershocks have been reported. Rescue teams are now combing the area amid reports that a number of people may be buried under rubble.

The earthquake struck at a relatively shallow depth of 10km just after 0400 local time (0200 GMT). Northern Italy is frequently rocked by minor earthquakes, but the country is well-prepared to deal with them, the BBC's Alan Johnston in Rome reports. The last major quake to hit the country killed nearly 300 people in the central town of L'Aquila in 2009.

A quadrillion is a big number: 1,000 times a trillion. Yet according to one of the world's leading derivatives experts, Paul Wilmott, who holds a doctorate in applied mathematics from Oxford University (and whose speaking voice sounds eerily like John Lennon's), $1.2 quadrillion is the so-called notional value of the worldwide derivatives market. To put that in perspective, the world's annual gross domestic product is between $50 trillion and $60 trillion.

To understand the concept of "notional value," it's useful to have an example. Let's say you borrow $1 million to buy an apartment and the interest rate on that loan gets reset every six months. Meanwhile, you turn around and rent that apartment out at a monthly fixed rate. If all your expenses including interest are less than the rent, you make money. But if the interest and expenses get bigger than the rent, you lose.

Britain’s biggest companies lost about £18 billion of their value, with the FTSE 100 tumbling 70.8 points to 5267.6. Lloyds fell 1¾p to 26p, RBS 1p to 20p and Barclays 5¾p to 176p. Oil prices dropped on concerns that a Greek exit will spark a slump in demand, while the pound and the euro slid against the dollar.

Concerns were sparked by savers pulling money out of banks in Greece, Spain and other countries on Europe’s periphery on fears their deposits will be devalued if their countries were forced out of the euro. ANY MOVE TOWARDS A BREAK-UP WILL BE PRECEDED BY RULES STOPPING DEPOSITORS FROM WITHDRAWING THEIR MONEY. M&G analyst Mike Riddell said deposit flight was a “rational response to the perceived increase in the risk of the single currency disintegrating”, and was “exceptionally worrying”.

The news follows comments by the EU trade commissioner Karel De Gucht claiming that the European Commission and the European Central Bank were working on an emergency scenario for a Greek exit from the euro. He told the De Standaard newspaper: "A year and a half ago there may have been the danger of a domino effect. But today there are, both within the European Central Bank and the European Commission, services that are working on emergency scenarios in case Greece doesn't make it.”

It is the first time an EU official has confirmed the existence of contingency plans. The threat of a Greek exit intensified yesterday after a ratings agency further downgraded the economy from -B rating to CCC. The statement from the agency Fitch read: "The downgrade of Greece's sovereign ratings reflects the heightened risk that Greece may not be able to sustain its membership of Economic and Monetary Union (EMU)."

In addition to its acute financial woes, Greece has entered a protracted political crisis after elections on May 6 left no party with enough seats in parliament to govern alone, and nine days of hectic talks failed to reach a coalition deal.

Either way, our single largest trading partner being in crisis creates practical difficulties for British businesses trying to sell goods and services to Europe. It affects orders, investment, profits, growth and jobs in the UK. There is some good news. British banks are not directly overly exposed to stricken Greece, unlike the French and German banks and governments who lent far too much. The Treasury took precautions last year and asked UK banks to reduce their exposure.

Britain also retains its own currency and our trade outside the EU is showing serious signs of improvement. During the crisis the pound has also recovered, making this a good year to holiday in Europe. Against a backdrop of gridlocked negotiations, and with evidence of runs on some banks in the eurozone, it looks as though it is all but over for Greece in the euro. In European capitals, contingency planning is under way.

If Greek withdrawal happens, and that could be within days, it will be very sudden. An emergency government in Athens will have to relaunch the drachma and probably impose something close to martial law to keep order. The real difficulty for Britain comes if there is then contagion, with panic spreading to bigger European countries such as Spain and Italy, which are also struggling with debts and uncompetitive economies. If that cannot be contained, expect the return of the “credit crunch” across Europe, which would make banking difficult, freeze trade and deepen Britain’s recession.

A summit of the G8 leading industrialized nations came down solidly in favor of a push to balance European austerity - an approach long driven by German Chancellor Angela Merkel - with a dose of US-style stimulus seen as vital to healing ailing euro-zone economies.

"We commit to take all necessary steps to strengthen and reinvigorate our economies and combat financial stresses, recognizing that the right measures are not the same for each of us," leaders said in a bold statement issued at their meeting at the Camp David presidential retreat in Maryland.

The message sent by the summit hosted by President Barack Obama reflected his own concerns that the euro-zone contagion, which threatens the future of Europe's 17-country single currency bloc, could hurt the fragile US recovery and his own re-election chances in November. In their final economic communique, the Group of Eight leaders welcomed discussions in Europe to broaden the focus to more pro-growth remedies and said: "We reaffirm our interest in Greece remaining in the euro zone while respecting its commitments."

The final wake-up call came from Moody's. On Thursday evening, the US rating agency downgraded 16 Spanish banks in one fell swoop, some of them by three notches. On Monday, the agency had already downgraded 26 Italian banks - including major institutions such as UniCredit and Intesa Sanpaolo. The outlook for all the institutions involved is negative, Moody's said.

These are drastic steps, but they are hardly excessive. The European sovereign debt crisis long ago also became a banking crisis. The fate of the affected countries can not be separated from that of their financial institutions: If a state goes bankrupt, its banks too will struggle to survive. On the other hand, the examples of Ireland and Spain show that a shaky banking system can quickly overwhelm national budgets.

Reports began trickling in earlier this week that savers in Greece were withdrawing hundreds of millions of euros from their bank accounts - the German news agency DPA reported that almost €900 million was withdrawn just on Monday alone. Since then Europe has been seized by the fear of a worst-case scenario in Greek's banking system: a so-called bank run, as customers who have lost confidence in their banks rush to take out their savings.

Such a run would be the final stage in the loss of confidence in the banks. For months now, wealthy individuals in crisis-hit countries have already been moving billions of euros abroad out of fears about the stability of the financial systems in their own countries. Until recently, however, there had been few signs of abnormal behavior in terms of ordinary savers withdrawing cash.

The reason a bank run is so feared is because it could land every bank in the world in trouble - even the healthiest ones. The banking system depends on the fact that banks only hold a small portion of customer deposits in cash that is ready to pay out. The rest is invested or passed on to other customers as loans.

Now, rumors are circulating that in Spain, too, people have begun to clear out their accounts at certain banks. The newspaper El Mundo reported that customers had withdrawn over €1 billion from the beleaguered major savings bank Bankia last week.

"I think the biggest risk is actually China because if you look at Greece, it's an insignificant economy," Faber said on CNBC Asia's “Capital Connection.” "Yes, they owe money, but the market knows that it's bankrupt." The European Central Bankwill be able to support Greece and European taxpayers would pay for it, he added. On the other hand, a slowdown in China, the world's second-largest economy, would have a huge impact on prices of industrial commodities, Faber said.

"In turn, this has a huge impact on the economies of countries like Brazil, the Middle East, Central Asia, Africa, and Australasia, so these countries could slow down meaningfully," he said. Faber, who correctly predicted the 1987 stock market crash and more recently forecast the stock market correction in August last year, said China's economy depends largely on capital spending, which tends to be volatile and has a strong multiplier effect on the economy.

A slowdown in China could have a painful impact on global gross domestic product growth as the nation is now the single largest contributor to global economic growth, the International Monetary Fund said earlier this year. The nation's contribution to global economic growth over 2010-13 is expected to be 31 percent, up from just 8 percent in the 1980s, the IMF said.

Pablo Triana, professor at the Esade business school, says that if people start to believe that a new peseta is "not a hallucination" THEY WILL START WITHDRAWING THEIR MONEY FROM SPANISH BANKS. "The biggest potential impact on Spain is the human impact", he explains, because of the "popularity of the eurozone in Spain".

Gail Allard, economics teacher at the IE business school, says the psychological impact would be "devastating" if Spain left the Euro. The Spaniards were very proud to enter the Euro, she adds, and "to shake-up that up would put cracks in the project that are very hard to repair".

Amid growing alarm within the Treasury over the impact of the crisis on Britain, a close ally of Chancellor George Osborne warned the financial contagion in Greece could spread across southern Europe. Mr Cameron flies to the United States today for talks with major industrial leaders, including Ms Merkel, hosted by [Mr] Barack Obama at his Camp David retreat.

The two-day G8 summit will be dominated by the renewed financial storm following the political deadlock in Greece and fears that the eurozone's uncertain future could affect all western nations. He will join other leaders in urging Ms Merkel to authorise German intervention to shore up the EU's weaker currencies.

Despite his political differences with François Hollande, Mr Cameron is likely to receive the backing of the new French President in casting the spotlight on the German government. The Prime Minister delivered his gloomiest warning yet of the dangers of the Greek debt crisis yesterday, making clear he felt hopes of rescuing the eurozone lie with Germany, whose economy is still growing strongly.