When the euro-zone government chiefs met on 21 July at a special summit in Brussels to agree on a package of measures to resolve the euro crisis, the World Socialist Web Site noted: “The summit has not solved the crisis, but merely postponed it. It is therefore only a matter of time before the pressure on the euro increases again, and the government chiefs will have to meet again in an emergency summit.”

It has taken exactly two weeks for this prediction to come true.

After the stock market panic of Thursday, the fate of the euro and the European Union is more uncertain than ever before. In addition to the peripheral countries of Greece, Ireland and Portugal, now Spain and Italy, two core states of the euro-zone, are facing difficulties refinancing their debts. Even France, the second largest economy in Europe, is having to pay much higher interest rates on government bonds than her German neighbours.

Europe presents the image of a continent whose governments are paralysed and at loggerheads, being driven forward helplessly by the financial markets. In this, they are certainly not just the “victims” of the panic on the stock exchanges. The growing national conflicts in Europe—along with the budget dispute and the signs of a coming recession in the US—have largely contributed to the stock market panic. This week alone, this panic destroyed worldwide assets worth some $2.5 trillion, a sum equivalent to the annual economic output of France.

After the euro summit on July 21, the risk premiums for Spanish and Italian government bonds soon began to rise again, despite the meeting agreeing to extend the powers of the European Rescue Fund (EFSF), supposed to help the highly indebted countries.

The announcement of early elections by Spanish Prime Minister José Luis Zapatero and a parliamentary speech of Italian Prime Minister Silvio Berlusconi also failed to calm the financial markets. Both countries have had to pay more than six percent interest for ten-year bonds.

The panic on the markets then escalated, when, on Thursday, a letter from EU Commission President Barroso to the leaders of the 17 euro-zone countries was made known, in which he demanded “a swift revaluation of all elements” that had been agreed at the euro summit two week earlier, and called for a substantial increase of the 440 billion euro European rescue fund.

In Berlin, which must raise about one-third of the fund, Barroso’s letter met with angry rejection. “It is impossible to tell whether re-opening the debate only two weeks after the summit will calm the markets,” said the spokesman for Finance Minister Wolfgang Schäuble.

The financial daily Handelsblatt said Barroso could not have chosen a worse time for his “show of ego”. Now the financial markets were in turmoil, “discrete action was called for, but no alarm messages via the media”.

A press conference by the head of the European Central Bank encountered similarly harsh reactions in Berlin. Jean-Claude Trichet announced that the ECB would restart the controversial purchase of government bonds of crisis-hit countries, previously halted for several months.

According to a report by Reuters news agency, there had been a heated debate in the ECB governing council; the two German and two other council members rejected the measure.

The international stock markets reacted to the announcements made by Barroso and Trichet, and the controversy they provoked, with the biggest losses since the crisis in 2008. Many observers fear that there could be a repeat of the earlier crisis.

Britain’s Guardian newspaper asked, “Are we heading for Meltdown 2?” It compared the situation with the beginning of World War I: “Even in the month or so after the assassination at Sarajevo, when the great powers gave up on diplomacy and prepared for conflict, the movements in financial markets were less violent than they were on Thursday.”

Should it really come to a second meltdown, says the Guardian, the political options for a solution would be far fewer than four years ago. Interest rates are already at rock-bottom and “the deepest recession since the 1930s has been followed by the feeblest recovery—weak, stuttering and at risk of being aborted at any moment.”

The Financial Times too fears “a full-scale financial meltdown” and asks: “Will that turn a sticky summer into a turbulent autumn? And then produce a wintry ‘real economy’ hit?”

There is no shortage of voices in the European media calling on the European heads of government to stand together, to act far-sightedly and not to drift from one crisis to another. On Friday, the German Chancellor Angela Merkel, French President Nicolas Sarkozy and Spanish Prime Minister Zapatero have agreed to hold a crisis conference call. But they will be just as unable to solve the crisis as the special summit two weeks ago and the many extraordinary summits that will follow.

The narrow-mindedness of the leading European politicians, the growth of national self-interest and the constant bickering between Berlin, Paris, Brussels and the other capitals are not the result of failures of character by the responsible politicians; the national narrow-mindedness of a Sarkozy, or the lack of a European vision of a Merkel, as many observers complain. Rather, they are an expression of profound social change.

Every aspect of economic and social life today is subject to the dictates of finance capital, which—detached from productive activity—only looks for a quick profit. Any longer-term policy that takes into account social needs, or at least tries to dampen domestic and social conflicts is thus impossible.

All political parties—whether conservative, liberal, Green, social democratic or “left”—have become subordinated to the dictates of the financial elite, which has immense riches. Their only answer to the crisis is handing over billions to the banks, on the one hand, and implementing new austerity programs to the detriment of the population, on the other.

The consequences are a persistent social decline and growing national conflicts. Society is heading towards massive revolutionary struggles and armed conflicts. The parallel drawn by the Guardian to the First World War is, in this regard, is not plucked from thin air.

The need is to prepare for the coming conflicts. The power of the financial elite can only be broken by the international working class. This requires a socialist programme and a new party. This is the aim of the Socialist Equality Party and the International Committee of the Fourth International.