The European Union faces the biggest challenge in its history, as a crisis of confidence compounds economic and social problems, European Commission President Jose Manuel Barroso said on Wednesday.

It's a crisis of confidence that has not happened for decades, Barroso said in his annual State of the Union address during a session of the European Parliament in the French city of Strasbourg.

Barroso also said Greece would remain a member of the euro single currency area and that if there was not deeper economic integration among European Union member states, the 27-member bloc faced fragmentation.

(Reporting by Luke Baker)