The Euro split

His speech was politely received by the audience of members of Chancellor Angela Merkel's centre-right ruling CDU party - but paradoxically it was followed by the announcement that Germany and France, the eurozone's two largest economies, had performed better than expected in the third quarter, with growth turning out tp be stable, thereby narrowly avoiding a triple-dip recession.

The inference was obvious: while Major's concerns centred on immigration, it is clear for most people in Europe the economy is the main issue. With one of its senior partners, the UK, threatening to leave the union, the EU is in crisis - and it could not come at a worse time for the Conservative Party ahead of this week's by-election in Rochester and Strood, with opinion polls suggesting Ukip is on course to win its second parliamentary seat.

All this brings into focus the growing debate about whether or not the UK is the odd one out, riven apart by Ukip with its anti-immigration agenda and insular approach. It also calls into question whether or not the EU is strong enough politically and economically to maintain its solidarity.

What does the EU think of the UK debate?

Across Europe there is some sympathy for British claims that it is in danger of being overwhelmed by the tide of immigration. The French in particular would like to see more being done to bolster the border controls at Calais where thousands of illegal immigrants, mainly north Africans, use the port as a base before attempting to cross the Channel. This has had an impact on the French economy as well as the local infrastructure.

However, the understanding is limited and there is growing impatience with the Tories' anti-immigration rhetoric. Germany shares some of the British concerns about the abuse of welfare payments and last week there was a general welcome for the decision of the European Court of Justice to withhold welfare payments from an unemployed Romanian woman living in the country. But against that, most Germans acknowledge that they have an ageing population and with record unemployment the country needs workers for low-skilled and frequently badly paid jobs. As Merkel put it last week, further restrictions on immigration were not needed as "freedom of movement is very important". She has also let it be known through diplomatic sources that if Prime Minister David Cameron continues to issue threats to leave the EU she will not try to stop him as he has already reached "a point of no return".

Merkel's views were echoed by her finance minister Wolfgang Schäuble, who claimed freedom of movement could not be restricted as it underpins European integration. "That would be incompatible with the European treaties," he said. "The basic rules of the EU are not up for negotiation."

Sympathy has also been tempered by the findings of the University College of London's Centre for Research that EU migrants - including citizens from new member states such as Poland - contributed more than £20 billion to the UK economy between 2001 and 2011. During the same period immigrants were 43% less likely than UK-born workers to receive state benefits or tax credits, and 7% less likely to occupy social housing. Although these figures were only made public as a result of the political fallout from the resignation of Liberal Democrat Home Office minister Norman Baker, they were given wide publicity across Europe and added to the perception that in its dealings with Europe the Tories are merely intent on promoting a "Britain First" policy.

What would happen if the UK left the EU?

Because there is no precedent for a member state leaving the EU, no-one really knows for certain what the after-effects would be, but most diplomats are convinced that it would be a long and messy process, and horribly expensive. As things stand today, the EU is the UK's main trading partner with a net worth of £400bn a year and the UK is a net contributor to the EU of around £12bn a year. Suddenly these figures are taking on a different significance as the possibility grows that a referendum could result in the UK leaving the EU.

With the rise in support for the anti-immigrant, eurosceptic Ukip the question is no longer an idle fantasy but a potential reality. Known by diplomats as "Brexit", it is currently under intense scrutiny - not least because it would leave a black hole in Europe's economy. The annual general meeting of employers' body the CBI in London last week was told that four out of five British businesses are in favour of staying in the EU whatever else the rest of the country thinks. CBI president Mike Rake, who is also chairman of telecoms giant BT, claimed that EU membership was "overwhelmingly in our national interest" as it represents 5% of British GDP, about £78bn a year.

A British exit would have other consequences, including ramifications for London as a financial centre - it is currently home to the headquarters of 500 banks and other institutions. Remove them and London's position would be untenable, especially for US-owned financial institutions such as Bank of America, Citigroup and Morgan Stanley, which have already made it clear that they will leave London if Britain decides to pull out of Europe. The matter would be complicated further by the fiscal problems. New legislation would have to be drafted and passed, which would probably take years to complete. As one UK diplomat put it yesterday: "The EU is already considered toxic in many member administrations and they would not react well to any changes which would undoubtedly bring with them unpopular new legislation."

Paradoxically, leaving the EU would not bring immediate improvement to the bugbear of immigration. The changed relationship with the EU would be put under immediate strain along the border between the Republic of Ireland and Northern Ireland. This border was seen to be porous during the years of the Troubles and it could cause problems again not just for illegal immigration but also for tax avoidance. Guarding it would put a huge strain on UK resources and any attempt at imposing a fixed controlled border could create resentment in Dublin.

What do other European countries think of the EU?

It is not just the UK which has issues with Brussels rule. Only in Germany are approval ratings uniformly high, with a recent poll from the Pew Center, a respected US think tank, showing that only in Germany do most people (59%) say their country has been well served by European integration. In countries such as Greece and Spain, which have seen economic collapse, the ratings are much lower.

This reflects the economic performances of the countries concerned and speaks volumes about Germany's current strength, but there are other indicators which show that the EU is not always a popular institution. In this year's European elections, eurosceptic parties did well across the board, with Ukip becoming the majority UK party (including one seat in Scotland).

The biggest downturn in optimism has taken place in France, which was once regarded as an equal partner with Germany in managing the affairs of the EU. To a great extent this has been triggered by dissatisfaction with president François Hollande, with the Pew Center recording that 67% of the population believe he is doing a bad job - 24% worse than the ratings given to Hollande's predecessor, Nicolas Sarkozy, in the last year of his presidency. The ratings are even worse when the economy is taken into account, with 91% saying that it is doing badly, up 10 percentage points since the last polls in 2012.

With the economy in stagnation the French have also begun questioning their commitment to the European project, with 77% believing European economic integration has made things worse for France, a rise of 14 points since last year. And 58% now have a bad impression of the European Union as an institution, up 18 points from the previous year. These dispiriting figures from the Washington think tank have now been reflected in France itself. In September, an IFOP poll showed that far-right Front National leader Marine Le Pen was ahead of Hollande for the first time, while the popularity of the president had sunk to an all-time low.

Although the next presidential elections are not due to take place until 2017, Le Pen's success is an indication of how unpopular the EU has become in French political life. The Front National also did well in the European elections but failed to form a right-wing caucus with Geert Wilders's Dutch Freedom party, the Austrian Freedom party, Italy's Lega Nord and Belgium's Flemish separatist Vlaams Belang. In itself, the FN's failure to collect 25 MEPs from seven countries to form a group does not represent critical defeat but it was a setback for gaining access to EU funding (worth £18 million a year) and for getting debating time in the chamber.

A spokesperson for Front National later admitted that it had failed in its bid to form a caucus within the EU because it had refused to enter into agreements with parties with "incompatible" values. These are thought to have included the ultra-conservative Polish New Right Congress, which advocates abolishing women's voting rights.