3) The Eurozone enters recession - Practically the entire Eurozone falls into recession, including the likes of France and Germany. A deteriorating economic outlook causes deficit estimates to be raised across the board, facilitating credit rating downgrades. Agreements for greater austerity fail to stem the tide and other attempts to kick the can down the road are pursued.
Although this headline isn’t official yet, after this morning’s PMI data it’s looking increasingly likely. Walter Kurtz at Sober Look claims It's just a matter of time before declining PMI will show up in Eurozone's GDP numbers:
European officials keep insisting that the euro area as a whole is not yet in a recession. That's wishful thinking because the latest PMI numbers say otherwise. PMI tends to be a leading indicator for GDP growth. PMI of 50 means no change.
Update - Mike “Mish” Shedlock agrees on missed budget targets: Eurozone PMI Disaster - Worst Downturn Since Mid-2009, Manufacturing and Composite at 35-Month Low; Expect Numerous GDP Downgrades, Missed Budget Targets