The emerging markets, meanwhile, will keep forging ahead during 2012. Even if China slows a bit, the world's second-largest economy should expand by 8% to 9%. The "big four" emerging markets - China, India, Russia and Brazil - now make up a quarter of the global economy. These "emerging giants" will account for the lion's share of world growth in 2012, just as they did in each of the past three years.

Having added my headline numbers to the predictive fray, I'd like to focus on an issue I believe will weigh heavily on the minds of Western economic policymakers during 2012 - namely, the price of crude oil.

When the Western world has previously hit the economic skids, the resulting fall in global oil demand has caused crude prices to fall too. As such, the West has benefited from a "self-correction" mechanism, our own economic slowdown creating the lower oil prices that, in turn, have assisted our recovery. During previous slowdowns, lower fuel costs have boosted the profitability of Western firms. Reduced inflationary pressures have provided our central banks with the room to cut interest rates.

So cheaper oil has helped the West climb out of periodic economic slumps. Yet this vital mechanism is now broken. Oil prices averaged $111 a barrel during 2011, up from $79 in 2010. Crude prices could stay at similarly elevated levels this year. Sky-high oil, it seems, is now compatible with Western recession. Commodity prices are compounding our economic woes, rather than helping us escape them. What's changed recently is that even if the big Western economies remain sluggish, and our oil use falls slightly, the fast-growing markets of the East retain their insatiable appetite for crude.

France's President Sarkozy said the crisis was not finished, while Italy's president called for more sacrifices. Growth in Europe has stalled as the debt crisis has forced governments to slash spending. The leaders' new year messages came as leading economists polled by the BBC said they expected a return to recession in Europe in the first half of 2012.

The cost of borrowing for some of the eurozone's largest economies, including Italy and Spain, has shot up in recent months as lenders fear governments will not be able to pay back money they have already borrowed. With growth stalled, the pressure is on governments across Europe, not just ones using the single currency, to cut spending in order to meet debt obligations.

Fears are now focusing on a potential second credit crunch, triggered by the exposure of banks across Europe to Italy's huge debt.

Iran delayed testing its long-range missiles during the drill, saying the weapons would be launched in the next few days. The United States and Israel say they have not ruled out military action against Iran if diplomacy fails to resolve a dispute over the country's nuclear program, which Tehran says is peaceful but the West says is a cover to build a bomb. Iran has long-range missile systems including the Shahab-3, which could reach Israel and US bases in the Middle East.

In the past week Iran has threatened to stop ships moving through the strategic Strait of Hormuz if sanctions are imposed on its oil exports. The threat has heightened tension between Iran and the West. The US Fifth Fleet said it will not allow any disruption of traffic in the vital oil shipping route.

Zhang, the bank's research director, recommended buying the dips: "The Chinese government should not only be cautious of the imported risk caused by rising global inflation, but also further optimize its foreign-exchange portfolio and purchase gold assets when the gold price shows a favorable fluctuation." China's $3.2 trillion in foreign reserves are currently invested one-third in US treasuries 20 percent in euro-denominated assets and only 1.8 percent in gold, according to China Daily. China has one of the world's biggest gold reserves at 1,054 tons.

The 10 Biggest Gold-Hoarding Countries In The World

(http://www.businessinsider.com/gold-holdings-by-country-2011-12#1-united-states-10)

#10 India Official gold holdings: 557.7 tonnes Percent of reserves: 9.0%

#9 Netherlands Official gold holdings: 612.5 tonnes Percent of reserves: 61.0%

#8 Japan Official gold holdings: 765.2 tonnes Percent of reserves: 3.3%

#7 Russia Official gold holdings: 851.5 tonnes Percent of reserves: 8.6%

#6 Switzerland Official gold holdings: 1,040.1 tonnes Percent of reserves: 14.3%

#5 China Official gold holdings: 1,054.1 tonnes Percent of reserves: 1.7%

#4 France Official gold holdings: 2,435.4 tonnes Percent of reserves: 71.0%

#3 Italy Official gold holdings: 2,451.8 tonnes Percent of reserves: 72.2%

#2 Germany Official gold holdings: 3,401.0 tonnes Percent of reserves: 72.6%

#1 United States Official gold holdings: 8,133.5 tonnes Percent of reserves: 75.5%

"Obviously we close 2011 with a huge amount of focus on the trials and tribulations of the eurozone," Mr Sands said. "I actually think the big news of last month's summit was that unfortunately once again the eurozone political leadership didn't really produce something that was that compelling or credible as a plan to deal with the problems and to re-engergise growth in the eurozone.

"We enter 2012 with a very difficult outlook for the eurozone [and] with an increasing possibility of countries actually leaving the eurozone. Nobody should underestimate what a big deal that would be, because it would be very difficult to manage the contagion risk, even if it was only Greece. The disruption from that would really be quite significant. That will have ramifications all over the world... because the simple maths is that the eurozone is a very large part of the global economy and if it is going slower, then economic trade will be slower around the world. Also just from a confidence perspective."

After the political failures of 2011, Mr Sands said his position had hardened on the possibility of one nation pulling out.

How much does time cost? That depends what you need it for. The time that Europe's leaders want to buy to tackle the euro crisis is a precious commodity. And its price keeps going up and up. Initially, it was supposed to cost 110 billion euros ($130 billion). That's how expensive the first EU bailout package for Greece was. Soon, it was expanded via a comprehensive rescue fund that helped out Portugal and Ireland. Then came a second bailout package for Greece, followed by an even more comprehensive rescue fund for the rest.

In late September 2011, representatives in Germany's parliament, the Bundestag, had not yet voted on this expanded package - which would put Germany alone on the hook for 211 billion euros - but it was already clear to them that even that wouldn't be enough. But nobody could say that out loud, and especially not Finance Minister Wolfgang Schauble, because they obviously didn't want to endanger the government's majority in parliament - and, thereby, its own ability to govern.

On top of that, the European Central Bank (ECB) is buying up sovereign bonds of debt-ridden euro-zone countries. At first, it was Greece, Portugal and Ireland. Then, beginning in the summer of 2011, it bought bonds from Italy and Spain. It now has a grand total of over 195 billion euros of bonds on its books. If things should go south, Germany will also ultimately be responsible for 27 percent of that figure, corresponding to Germany's share of the ECB's capital.

The argument is always that it's all about winning time. Time that would allow the financial markets to settle down. Time that would let the debt-ridden PIIGS states (Portugal, Ireland, Italy, Greece and Spain) implement stringent cost-cutting measures. Time that would make it possible for the euro zone to reform its institutions and rules - and perhaps even let Greece default without having the entire euro immediately implode.

But is all that money really well invested? And will the time it has bought also be put to sensible use?

As the euro plunged against the yen to its lowest level for 10 years, Mr Schauble was reported as saying he could rule out the eurozone breaking up: "According to everything that I know at the moment, yes." Terry Smith, chief executive of Tullett Prebon, said the Mr Schauble was "talking his own book" in hoping the current agreements will save the euro. "The German finance minister has not said anything substantive which changes the situation," he told The Daily Telegraph. "If the eurozone crisis could be solved by confident pronouncements, it would already be saved. I would be shocked if Greece does not leave the eurozone in 2012 and this does not lead the markets to test the resolve to defend the positions of Portugal, Spain, Italy and, ultimately, France."

Jurgen Michels, an economist at Citigroup, said that Mr Schauble was being "optimistic" as "we expect a severe recession in the euro area and sharp contractions in the periphery countries including Italy and Spain - 2012 will be a very difficult year for the euro area."

Nicolas Spiro, a sovereign risk consultant, said it was more likely that the crisis would escalate because leaders have "failed to meaningfully address the issue that concerns investors the most: the solvency of governments".

The Kurds, whose kingmaking role in Iraqi electoral politics has been eroded by Maliki's assertion of his own authority, will try to use Vice-President Tareq al-Hashemi's plight to gain leverage in their own disputes with Baghdad, analysts say. They, like Maliki and other Iraqi politicians, are playing for high stakes in a potentially destabilizing game following the US withdrawal from a nation whose ethnic and sectarian struggles may be affected by the uprising in Syria next door.

Shi'ite factions which emerged as winners from the US invasion of Iraq fret that a Sunni government may replace Syrian President Bashar al-Assad, an ally of Shi'ite Iran, and embolden Iraqi Sunnis whose heartlands border Syria. "The fact that the Kurds have ended up in the middle of this crisis - and are likely being lobbied by the US to resolve the crisis rather than exacerbate it - means that they are returning to their kingmaker role once again," said Gala Riani, an analyst at IHS Global Insight. "It is likely that the Kurds will lay low, not inflame the situation and try to mediate whilst at the same time strengthen their hands vis-a-vis the federal government to try to resolve some outstanding issues."

The Kurds are disgruntled over Maliki's failure to keep promises to solve long-standing disputes over oil contracts, land and constitutional rights that the Shi'ite leader made when he formed his power-sharing government last year. They also fear Maliki is consolidating power in his own hands and sidelining old Sunni rivals such as Hashemi and his own deputy Saleh al-Mutlaq. Maliki asked parliament to fire Mutlaq for comparing him with deposed leader Saddam Hussein.

The index of leading shares rose 5.5 points - or 0.1 per cent - on Friday to close at 5572.28 in thin trading - a fall of 327.66 points, or 5.55 per cent, over the year. This is its seventh worst annual performance since 1984 and its worst since a 31 per cent fall in 2008 when the Lehman collapse brought the global financial system to the brink of collapse. The index rose 22 per cent in 2009 and 9 per cent last year.

Large market falls in 2011 were driven by a series of dramatic events, including Japan's devastating earthquake; prolonged political stalemate in the US over attempts to raise the nation's debt ceiling; and the ongoing eurozone sovereign debt crisis. The FTSE clawed back some gains at the end of the year after hitting a year-low of 4944.4 in October when the escalating eurozone debt crisis triggered a global stock market sell-off, but economic uncertainty continues.

Coming nearly a week after radical sect Boko Haram set off a series of bombs across Nigeria on Christmas Day, including one at a church that killed at least 37 people and wounded 57, Jonathan told state television the measures would aim to restore security in troubled parts of Nigeria's north. "The temporary closure of our borders in the affected areas is only an interim measure designed to address the current security challenges and will be resumed as soon as normalcy is restored," he said.

He added that his chief of defence staff had been instructed to take other "appropriate" measures, including setting up a special counter-terrorism force. The commissioner of police for Plateau state, Dipo Ayeni, told Reuters: "We have deployed this tactic of a show of force so that we can celebrate the New Year without any hindrance, and so there should be no cause for panic."

"The events that caused Nigeria's civil war are repeating themselves," said Uche Udemezue, an Igbo woman in the southeast, referring to the secessionist war of her people against northern rulers in which more than a million people were killed in the late 1960s. "The north should know nobody has a monopoly on violence."

A spokesman for Tokyo Electric Power said there were no reports of any abnormalities at the tsunami-crippled Fukushima Daiichi nuclear plan following the quake. Some high-speed train services in northern Japan were suspended after the earthquake, but soon resumed operations, Kyodo news reported.

The 7.0 magnitude earthquake, at a depth of nearly 217 miles, was recorded off Japan's southeastern Izu islands on Sunday at 0527 GMT, the US Geological Survey reported. The Hawaii-based US Pacific Tsunami Warning Center has not issued a tsunami warning following the earthquake located south-southwest of Hachijo-jima in the Izu islands.

Earthquakes are common in Japan, one of the world's most seismically active areas. The country accounts for about 20 percent of the world's earthquakes of magnitude 6 or greater.

"Discourse about closing the Strait of Hormuz belongs to five years ago. Today's debate in the Islamic Republic of Iran contains new layers and the time has not come to raise it," General Masoud Jazayeri said in comments posted Saturday on the Guard's website, sepahnews.com. Jazayeri did not elaborate.

The latest developments came on the same day that the country's top nuclear negotiator announced Iran is proposing a new round of talks about its controversial nuclear program with the six world powers. The West recently imposed new sanctions over Tehran's uranium enrichment program, which is a potential pathway to making nuclear arms.

US military officials had warned Wednesday that any attempt by Iran to disrupt oil shipments at the mouth of the Persian Gulf "will not be tolerated." Pentagon spokesman George Little described the Strait of Hormuz, as an "economic lifeline" vital to stability in the region. And a spokeswoman for the US Navy's 5th fleet warned Iran against disrupting shipments in the strait, saying the US Navy keeps a "robust presence in the region" and is "ready to counter malevolent actions to ensure freedom of navigation."

Iranian officials had threatened to use the passageway to retaliate if the West imposes new sanctions targeting Tehran's oil exports over the country's suspect nuclear program. "Closing the Strait of Hormuz is very easy for Iranian naval forces," Admiral Habibollah Sayyari told state-run Press TV on Wednesday. "Iran has comprehensive control over the strategic waterway."

The euro had proved resilient for much of the year - burning hedge funds that bet on a steeper decline - but on Friday touched a 10-year low against the Japanese yen, and is near lows against the dollar last touched a year ago. "Investors were more optimistic at the start of the year, but as the year progressed they were forced to come to grips with the debt levels in the western world," said Navtej Nandra, the international head of Morgan Stanley's asset management arm.

The S&P 500 is flat this year while the FTSE 100 has only dropped 5.5 per cent. But the Eurofirst 300 gauge of blue-chip European companies has lost 11 per cent, led by the French and Italian exchanges. The MSCI Emerging Markets index has shed a fifth of its value despite strong growth in China and other emerging markets.

Despite efforts by policymakers to shore up the eurozone, analysts and bankers expect next year to start on a glum note, as Europe continues to grapple with its debt crisis. One of the biggest immediate tests will be the hundreds of billions of euros worth of government and bank debt that comes due in the first three months of the year.

Countries on Europe's periphery, on the other hand, face funding costs that remain at near record highs, despite a series of summits that have unveiled various measures to restore investor confidence in the eurozone. There is more than 457 billion euros of eurozone government debt due to be repaid in the first quarter of 2012, according to calculations by Citigroup. Italy has to repay almost 113 billion euros in the first three months of next year - at a time when its funding costs remain elevated.

While the US economy is showing signs of recovery and most emerging market countries are still growing at a healthy clip, some investors fear that China's economy could be facing a "hard landing" next year, posing yet another danger to the fragile global economy.

The bearded men and young boys in Jerusalem's ultra-Orthodox Mea Shearim neighbourhood were ostensibly gathered to protest the jailing of a member of their community for leading vigilante attacks against a local religious bookshop, which was considered not religious enough by hardliners.

But ultra-Orthodox news website Kikar Hashabbat said that the main purpose of the rally had become that of fighting back against "incitement against the ultra-Orthodox public". Jews in Germany and countries occupied by the Nazis were forced to wear yellow stars to identify themselves in public. Kikar Hashabbat said that wearing them at the rally was "an exceptional protest measure". A witness said that a television news crew was shoved by protestors but police spokesman Micky Rosenfeld said there were no incidents or arrests.

Israeli TV channels have screened images from the town of Beit Shemesh, where hardline residents are waging a sometimes violent gender segregation campaign, which showed an ultra-Orthodox man in Beit Shemesh spitting at a woman and others hurling verbal abuse at an eight-year-old schoolgirl. The scenes have prompted outraged newspaper editorials and vows from politicians to get tough with troublemakers.

"We must pursue our efforts with determination... so that the crisis does not lead to a disorderly and catastrophic collapse. So that we can keep the euro," he said. Papademos - who took the helm of a unity government in November to implement EU and IMF imposed austerity measures to try to save the indebted nation from bankruptcy, said the first quarter will be particularly crucial.

"We are living through the worst post-war national and international crisis. We will get through it but there is no magic bullet." Papademos called on the country's political forces on the left, right and far-right that back his government to show "responsibility and work together". The parties in the coalition disagree over when early elections should be held, with the Socialist Pasok party preferring the end of April while some conservatives want a vote by mid-April.

The conservative New Democracy has made clear that it is aiming for early polls, most likely in February, but far-right Laos leader George Karatzaferis has suggested the coalition should remain in power longer. The Pasok party wants the government to last as long as it takes to get a second debt bailout programme passed in parliament but sources have said that this may take some time to complete, pushing back the polls.