Unfortunately, I too faced the same error.
Surprisingly, I can read mail, but not send.
At first I thought App passwords were the way ( http://windows.microsoft.com/en-us/windows/app-passwords-two-step-verification ) but no, what should otherwise work, does not. Although that would be a dirty fix, two-stage verification cannot be turned off at all.
I'm surprised at how unhelpful the official responses are, it seems as if they just choose to ignore the problem just because it concerns a competent service, no matter whether the fault is at Microsoft's end. Really, if you don't even bother going beyond the vanilla troubleshooting your manual suggests, you're simply providing a bad product.
I expect that my opinion can be heard with honesty and not be deemed inflammatory.
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