Ambrose Pritchard from The Telegraph.

"Germany’s exports are falling at the fastest rate since the global crisis in 2009, raising fears of a triple-dip recession and a disastrous relapse for the rest of the eurozone.
Christine Lagarde, the head of the International Monetary Fund, warned that the eurozone is at “serious risk” of falling back into recession if nothing is done, and is in danger of suffering a lost decade. “If the right policies are decided, if both surplus and deficit countries do what they have to do, it is avoidable,” she said. The wording is a clear call to Germany for an immediate shift in policy.
The ECB warned in its monthly report that the eurozone jobs market has failed to recover as expected, with the numbers out of work for 12 months or longer still rising. “It warrants particular attention from policymakers as it points to an elevated risk of a marked increase in structural unemployment across the euro area, and potential hysteresis effects,” it said. In technical terms, it said there had been an "outward shift in the Beveridge Curve".

The bank said structural unemployment has jumped to 10.3pc and is worst in some of the crisis countries forced to shake up their labour markets. While couched in cautious language this is an admission that the supposed cure of “labour flexibility” imposed by the EU on southern Europe is not working as hoped, and may stem from a false diagnosis of Europe’s jobs crisis. It called for retraining and other “active labour market policies” to bring millions of marginalised people back into the workforce. This is exactly what critics have been saying all along."

Deflationary spiral risk increases

"Ruben Segura-Cayuela, from Bank of America, said low inflation has become “the biggest threat to the dynamics of public debt” in the eurozone, warning that debt ratios risk “spiraling up” even at levels of around 0.5pc."

I love how the "Benchmark" scenarios all have gdp debt levels leveling off and declining in about 5 years. What a joke.

More:
"Analysts are watching German politics just as closely as ECB language. The rise of Germany’s AfD anti-euro party raises the political bar even further for full-fledged QE, and eurosceptics have announced their intention to file cases at the German constitutional court to block asset purchases once they begin.

The court has already ruled that the ECB’s backstop measures for Italian and Spanish debt (OMT) “manifestly violate” the EU Treaties and are probably “Ultra Vires”, which prohibits the Bundesbank from taking part. Pending cases on QE would raise questions over whether the Bundesbank might have to step aside on asset purchases.

The current circumstances are very different from July 2012, when Mr Draghi had the full political backing of the German finance ministry for his OMT rescue plans. This time he must battle critics across the whole political spectrum in Germany.

Giulio Mazzolini and Ashoka Mody, from the Bruegel think tank in Brussels, said the eurozone seems to be tipping into a “debt-deflation cycle” as rising debt and deflation feed off each other, yet the authorities remain paralyzed and still refuse to face up the gravity of the threat. “Even now, ECB officials regard deflation to be unlikely,” they said."

I think this is an older video dating back to 2011 pre-US downgrade. PIMCO'S El-Erian via Zerohedge. Structural unemployment, central bank creating systemic risk, the Eurozone market design issues and execution.Financial repression, deflation. you have heard it all here before. He is more optimisitc then i am aboout China's ability to manage its economy.

And I feel fine.
There will undoubtedly be some intervention by the Fed and ECB in the coming weeks that will calm the markets. 

I have spent a lot of time thinking about the dynamics of how the macro world would unfold since the “Great Recession”. I was more pessimistic  than turned out to be warranted with respect to the short term performance of the equity markets. My pessimism was based on a belief that long run growth would be much lower in the next decade, and that the systematic imbalances in  the global economy (US-Europe-China) would be very painful. I called for copper to fall in February of 2010, and I called for the purchase of CDS of Spain and Italy in May 2010. I was wrong about the former right about the latter. I also  became aware of the OECD issue of structural unemployment. I chronicled these views in an article published in the Geopolitics of Energy titled “Gimme Shelter: Expect More Volatility in the Oil Market over the Next Decade”. 
 
In my summary of that article I wrote

 “We are entering a period of time where global imbalances can no longer go unattended.  However, there remains significant uncertainty concerning how these imbalances will be resolved - in an orderly fashion or in response to a crisis?  It is certain that global growth prospects will be lower for much of the next decade.

For those who are “certain” that the BRICs have decoupled from  the developed world, that structural unemployment does not matter and the Europe  and US will muddle through and will be back to 3%+ grow soon, I end with the  words of the poet Yeats.

 Excerpt from ‘The Second  Coming’:

Turning and turning in the widening gyre
The falcon cannot hear the falconer; 
Things fall apart; the centre cannot hold; 
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned; 
The best lack all convictions, while the worst
Are full of passionate intensity."

 My pessimism was bounded because while I thought from its beginning (2002) that Euro was untenable; I assumed that while things would be markedly worse in China and Japan -their situations still would be manageable. 

In the intervening 6 months, I have spent a lot of time thinking about transition dynamics and end game, with the recent realization that the former is way more important than the latter. The unprecedented central bank balance sheet expansion by the Fed and ECB that has (temporarily IMO) buoyed the financial markets. Notwithstanding Europe is in recession and it looks
increasingly like China, Japan and the US are slowing down. In short - my macro call (that went against the herd) has been bang
on.
 
And yet I expected a better policy response from all countries then those that have been evidenced. I expect in the days to come that we will get a good news announcement from the IMF, ECB, Fed or Germany on the Eurozone or US economy that will comfort the markets and reverse the markets current free fall. I am even more convinced that what will be offered will just kick the can down the road and that the road is approaching the end of the cliff.

I have become convinced by my studies that policy makers have lost the ability to manage the system and some sort of catastrophic wash out even in the global economy and stock market is coming. There isn’t a single country that is correctly managing its policy response correctly, (imo, though the US is the least bad of a terrible cohort).

As an example, below is a screen shot of a slide shown at a recent Milken Institute panel at which Hugh Hendry was one of the participants. There is 62 Trillion in loans the European banking system – many of these will have to be sold for Basil 3.(BTW as a frame of reference world GDP  was 63 Trillion USD in 2010.) How much deleveraging is required is difficult to say for sure because I am not sure how much the shadow banking system differs between them. If you assume shadow banking is the same for both than the European Banking system will  have to decrease by more than 50%. How much will Basil 3 require? How much can they fudge? How much will be purchased by the ESM/ECB? Regardless, this is inherently  deflationary. And then you have the inevitable China and Japan writedowns. Even massive central bank money printing by these countries will make the USD stronger and be inherently deflationary for countries the US (and Canada). It seems not unreasonable that there needs to be a credit writedown across the world that begins to approach 1/2 to 1 year of world GDP. This seems like the mother of all credit market events. 

My macro view is that Europe and China are going to be trying to devalue against the USD and that this will be inherently deflationary. So I am expecting a massive wave of deflation prompted by a hard landing (collapse) Europe China and Japan. The policy response to this will be massive money printing and inflation. It appears that deflation follwed by inflation will be the transition dynamics.