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Europe is slowly but surely sliding towards a recession: investors are becoming increasingly pessimistic about the prospects for development of the eurozone. According to Reuters, the general index of business and consumer confidence in August fell to its lowest level in the past three years. Hopes for a gradual improvement in the economic situation in the Old World have once again collapsed. Since this is the fifth month in a row that the general index of confidence has fallen, it is not difficult to understand those investors who were waiting for better times in the economies of the eurozone countries. Despite all the efforts, two insurmountable problems - the debt crisis and the recession - are having a negative impact on the mood of the players in the market.

"But in the Greek hall…"

"When we find ourselves in a situation of an actual recession, which has gripped not just the peripheral countries but also the leader-countries, of course, the mood of consumers and of business deteriorates, and so, in my opinion, the reason is obvious: the deterioration in mood is linked, first and foremost, with the state of the economy," the Russian expert Kirill Tremasov notes.

However, it would be wrong to believe that these are the only reasons for the slump. In assessing the situation in Europe, investors see a picture that is far from optimistic: governments are unable to introduce new measures to boost the European economy, and this leads to states with a high debt load sliding further into recession.

The main efforts of the European financial structures are currently directed towards overcoming the crisis in Greece. On 11 September the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF) refused to endorse Greece's plan to reduce state spending by 11.5bn euros. Earlier The Financial Times reported that Greece was hoping to extend by two years the programme of aid from the EU in order to stabilize the situation with its state debt and restore growth in the national economy.

So the "troika" is demanding that even tougher measures be taken in the spheres controlled by the government of the most problematic country on the continent. As a spokesman for the IMF, Poul Thomsen, says, the Greek programme faces "an even longer path before approval". The European financial institutions have still not forgotten that in the past Greece has failed to fulfil her promises to carry out the necessary administrative reforms. In the opinion of experts, the measures proposed by Athens, which include privatization and increasing taxes, will not bring the required results. According to Germany's Finance Minister Wolfgang Schauble, the EU's possibilities of rendering financial assistance to Greece are not limitless. "Throwing money into a bottomless pit is irresponsible," he noted. "Aid to Greece has its limits and we cannot create yet another programme."

Athens has been receiving financial aid since May 2010. At the time the Greek authorities approached the EU and the IMF, aware that the country did not have the money to cover its state debts of 300bn euros. In that time the country has been offered two tranches of international aid - of 110bn and 140bn euros. Despite such substantial help from its partners, Greece has been unable to correct the situation in the country. At this moment in time Antonis Samaras' government is asking for 31bn euros. If this aid is rejected Greece will have to declare a default and leave the eurozone.

The debt crisis is also threatening another two countries in the eurozone - Spain and Italy. However, having learnt from the bitter experience of Greece, they have still not resolved the question of credits. The Italian finance minister said that his country is trying to get by without external aid until there is a new hike in interest rates on its debts. And as far as Spain is concerned, there have been rumours that a fourth economy in the eurozone will be forced to ask for help, mainly to rescue its banks. How much money will be needed to stabilize the situation of Mariano Rajoy's government is not fully known. According to reports in Euronews, the press has already heard that independent auditors invited by Madrid have estimated the requirements of the banks for extra capital at 60bn euros.

At the crossroads

The debt crisis, which began in the peripheries of the eurozone and is getting ever wider, has exposed many problems within the European Union. Although it is to a certain extent easy to analyze and reveal the reasons for the crisis, it is very difficult to give an answer to the question of how the eurozone is to solve it, if ever.

Today there are obvious serious flaws in the idea of an allied economy. For example, when the single currency was introduced, the fact was ignored that, in the first place, the European countries have developed in different ways, and, secondly, they are very different historically. Their economic mechanisms and the well-being of the people at the initial stage of unification were also different. Today, even the most ardent supporters of a single currency in Europe are forced to admit that the eurozone was formed incorrectly, and the way it functions does not stand up to criticism. For example, former French President Nicolas Sarkozy said that it was a mistake for Greece to join the eurozone.

What will happen to the European Union in the light of recent events? One road leads to the complete collapse of the euro with all the predictable and unpredictable economic consequences. The other to access to unrestricted finances, but in exchange for a handing over of sovereignties. Independence or subordination to super-government - these are the alternatives facing the European governments.

It has to be said, however, that throughout the present crisis the European leaders have avoided putting the question in such a way. At official level the collapse of the eurozone is not on the agenda. As a spokesman for the European Commission, Olivier Bailly said, it is "not working on either an option of the dissolution of the eurozone or on an emergency plan or any other scenarios. We are doing everything possible to preserve the integrity of the eurozone and we want this to happen simultaneously with the same activity in the EU member-states."  

This means that some of the countries in the European Union are prepared to choose the second path to find a way out of the deadlock. Furthermore, the first moves on this direction have already been made. The Future of Europe group, which includes the foreign ministers of 11 of the 27 states, has spoken of the need to introduce into the EU the post of a president elected by popular vote and for single visas to be issued for the whole of the EU. Serious reform of all political and financial institutions is also being proposed. This includes creating a single Foreign Ministry for all the countries of the union, the formation of a single police body which would function within the framework of the EU's borders and, possibly, a single army as well. As the document points out, "the aim is to form a European defence policy including unified efforts in the sphere of the military industry, including the creation of a single arms market. For some countries this will over time mean the creation of a single army".

The idea of supernational structures within the framework of the European Union has been discussed at the highest level of late. Recently the head of the European Commission Jose Barroso, in a speech to members of the European Parliament in Strasbourg, urged the countries of the European Union to limit the powers of their national governments. Barroso said literally the following: "I think that the future of Europe is linked with closer integration. More integration means more democracy, and federation is the democratic solution for such unity. It protects our countries, but at the same time it explains certain rules of exchange of power and exchange of sovereignty."

Of course, despite all the statements of an optimistic nature, the situation in the eurozone remains extremely complex. The ratings agencies continue to lower their assessments of the leading countries. Germany, the main creditor and locomotive of the eurozone, is ever more tightening its positions in relation to those responsible for the crisis. On the other hand, a lack of confidence in Germany itself and its real aims for the unification of the EU into a federation is growing among the people of the EU. In any event, most experts feel that Europe has entered the final phase of the crisis. In the course of the next few months either a political union will be created, which will take away a considerable portion of the sovereignty of the participants, or one can expect the collapse of the euro and a completely different state of a European crisis. And, incidentally, why just European?