The personification "she is a fen of stagnant waters" used in lines 2-3 refers to England being likened to a swamp or marsh (a "fen") that is stagnant and unproductive. This imagery conveys the idea that England is in a state of decay or stagnation, unable to move forward or grow. Therefore, the most fitting interpretation is:
3. England's many problems prevent it from progressing as a nation.
This interpretation reflects the overall lamentation in the poem about the decline of moral and societal standards in England at that time.