Hamish McRae: Now it's not just a two-speed Europe, but three speeds or more

So would a two-speed Europe be such a bad thing? Actually, in economic terms, we already have one. This division, however, is not between countries in the eurozone and those outside it but rather within the eurozone itself – between the core countries that are benefiting from the single currency and the fringe ones that are struggling to cope with its disciplines. Strange as it may seem, some of the "outs", such as Sweden and Denmark but also to some extent the UK, are performing more like the eurozone core, and less like the fringe.

This week has seen Angela Merkel set out her vision of a fiscal and political union as a way of coping with the sovereign debt crisis. That is a completely rational and reasonable position to take. She would not put it in these terms but, if Germany has to give at least a partial guarantee for the debt of other eurozone countries, which is pretty much what is de facto happening, then it has to have control over their fiscal policies. And the only way that can be sustained is by political union.

This is rational and reasonable, and to present it as some sort of Anschluss, reminiscent of the German link-up with Austria in 1938, is both offensive and wrong. The alternative vision, in effect welcoming a multi-speed Europe, has been set out by David Cameron. That idea of two speeds, with Britain in the slow lane, has led to worries about the status of this country. But if you look at the economic speed, as opposed to the speed of political integration, the results are very different.

Take the latest growth figures for the third quarter, out yesterday. The eurozone as a whole grew by 0.2 per cent, but there were large differences within the region. Thus the German economy grew by 0.5 per cent and France 0.4 per cent, which compares to 0.5 per cent for the UK. But Spain and Portugal contracted by 0.4 per cent and, while we don't yet have figures for Italy or Greece, estimates suggest that the latter clearly shrank and the former at best stagnated.

That is just one quarter's figures but, if you take the trend of industrial production over the past few years, Germany is now just about back to its peak in 2008, whereas Spanish industrial production has hardly risen from its floor in 2009 and Italy has made up only about one-third of the lost ground. A similar divergence has occurred in unemployment levels, with Spain the highest in Europe at 21.5 per cent, and Germany at its lowest for 22 years at 6.6 per cent.

Alongside this economic divergence has been added financial divergence. Three years ago, eurozone countries could borrow at more or less the same rates: Greece paid more than Germany but the premium was only around one percentage point. Now Greece, Portugal and Ireland cannot borrow at all from the markets. Yesterday saw Italian yields back above 7 per cent and Spain being unable to sell its full quota of short-term debt, despite paying more than 5 per cent for one-year loans. Even France would have to pay more than 3.5 per cent for 10-year money, whereas Britain would pay only a little above 2 per cent, not that much more than Germany at 1.75 per cent.

So in financial terms there is actually a three-speed Europe, with Germany and the UK in the fast lane, France in the middle lane, and Spain and Italy in the slow lane. (I suppose you could say that the bailout countries, Greece, Portugal and Ireland, are on the hard shoulder, but that is a bit unfair on Ireland, whose economy may be back to growth.) These market movements of the past few days have become quite ugly because the world's saving community is in effect saying that it thinks Italy will need to be rescued, in effect by Germany. A multi-speed Europe exists and it will be devilishly hard to close the gap.

Block the borders and you risk paying a price

Yes, but how do immigration controls affect the economy? The row over the UK's porous borders is essentially political rather than economic but ease of migration does over time have a profound economic impact.

We know that more people in a country will generate more economic activity: GDP will be higher. Thus during the decade before the 2008 downturn the British economy was able to grow at above its long-term trend because it imported people. But whether GDP per head is higher than it otherwise would be is another matter, depending on the type of inward migration, the skill-base of the migrants, their age and so on. My guess is that real GDP per head benefited from the great migration boom but the boom may have increased income disparities.

When you look to future dynamics it is even harder to be sure. There are side-effects from attempts to control migration. Thus we know that tighter border controls in the US damaged tourism. But we don't know how migration affects inward investment: to what extent do companies choose location on the basis of ease of shifting staff? Nor do we know the long-term economic burden imposed by border queues at airports. But there must be a cost and right now any drag on economic activity is unwelcome.

h.mcrae@independent.co.uk