Yesterday was the worst day for world markets of the year. The euro zone unemployment rate is at a record 11%. Manufacturing crashed in Great Britain. The jobless rate went up in the US. Emerging economies in Brazil and China are cooling off.

And Robert Zoellick, head of the World Bank, is warning of "impending catastrophe" that will mirror the financial crisis of 2008.

Daily Mail:

Mr Zoellick, who stands down at the end of the month after five years in charge of the watchdog, said it was 'far from clear that eurozone leaders have steeled themselves' for the looming  catastrophe amid fears of a Greek exit from the single currency and meltdown in Spain.

The flow of money into so-called 'safe havens' such as UK, German and US government debt turned into a stampede yesterday.

In Berlin the two-year government bond yield fell below zero for the first time, with the bizarre result that jittery international investors are now  paying - rather than being paid - for lending to Germany.

There was a raft of dismal economic news from around the world, with manufacturing output falling in Britain and Europe, unemployment jumping in the eurozone and America, and fast-emerging economies such as Brazil and China showing signs of running out of steam.

Bond yields soared in Spain and Italy, inching toward the 7% danger level. Zoellick warned that things were beginning to look an awful lot like they did after Lehman Brothers went belly up. A Greek exit from the euro would be just too unpredictable for leaders to manage:

Mr Zoellick said: 'Eurozone leaders need to be prepared to recapitalise banks. In the eurozone, the guarantees of some national sovereigns are unlikely to be sufficient and only that of the "euro-sovereign" will suffice.

'It is far from clear that eurozone leaders have steeled themselves for this step. Eurozone leaders need to be ready.

'There will not be time for meetings of finance ministers to discuss the outlook and debate the politics.

'In panicked markets, investors flee to safe assets, sparking other flames.'

Yesterday investors scrambling for lifelines piled into German, US and UK government debt.

Not only did the German two-year bond yield fall below zero for the first time, but also the yield on ten-year UK gilts - the benchmark borrowing cost for the British Government - hit a record low of 1.44 per cent.

The chief of the European Central Bank called the euro zone "unsustainable." The question is, are we going to go down with Europe or can we inoculate ourselves from the contagion?

Our banks are stronger today than they were in 2008 - but not by much. They have more reserves but are still exposed to shocks from Europe if banks start collapsing like dominoes and the debt crisis wreaks havoc.

With the US economy in a recession "red zone," it won't take much to push us back into negatitve growth and steeply rising unemployment. It would mean the defeat of Obama in November but would present Mitt Romney with towering challenges from his first day in office.

Will the euro zone once again "muddle through" as they have been doing for the last two years? Or will the can they've been kicking down the road finally come to rest and blow up in their faces?

Stay tuned. It will probably be a very tense summer both here and across the pond.