This paper presents the XMM-Newton first-light observations of the Hickson-
16 compact group of galaxies. Groups are possibly the oldest large-scale st
ructures in the Universe, pre-dating clusters of galaxies, and are highly e
volved. This group of small galaxies, at a redshift of 0.0132 (or 80 Mpc) i
s exceptional in the having the highest concentration of starburst or AGN a
ctivity in the nearby Universe. So it is a veritable laboratory for the stu
dy of the relationship between galaxy interactions and nuclear activity. Pr
evious optical emission line studies indicated a strong ionising continuum
in the galaxies, but its origin, whether from starbursts, or AGN, was uncle
ar. Combined imaging and spectroscopy with the EPIC X-ray CCDs unequivocall
y reveals a heavily obscured AGN and a separately identified thermal (starb
urst) plasma, in NGC 835, NGC 833, & NGC 839. NGC 838 shows only starburst
thermal emission. Starbursts and AGN can evidently coexist in members of th
is highly evolved system of merged and merging galaxies, implying a high pr
obability for the formation of AGN as well as starbursts in post-merger gal
axies.