Ken Clarke has said it would be a "disaster" for Britain if it left the EU, as eurosceptic Tory MPs press David Cameron to take a tough line during budget negotiations.
Speaking ahead of a summit this week to negotiate the EU budget, Clarke said the UK's negotiating position was being undermined by the "irresponsible" debate about its continuing membership.
"We are going through a very curious stage in the national debate. For the past 20 years, the country gets near to having a nervous breakdown on the subject every now and then," he told BBC Radio 4's Today programme.
Clarke has warned of the "folly" of leaving the EU
"It would be a disaster for the British economy if we were to leave the European Union. It damages our influence in these great critical events at the moment if we keep casting doubt on our continuing membership.
"Putting our membership of the European Union at risk is complete folly and irresponsible debate about it at the moment weakens Britain's role at a table where a lot of very important things have to be said."
A leading businessman also waded into the row over the UK's involvement in Europe today by warning of the risks to British industry of "isolation".
CBI president Sir Roger Carr pointed out that Europe accounts for half of British exports, telling firms that while they should look for new partners, they must not forget "old friends".
Opening the CBI's annual conference in London, Sir Roger, chairman of energy giant Centrica, said: "Whatever the popular appeal may be of withdrawal, businessmen and politicians must keep a bridge firmly in place.
"As countries of Europe bind together in pursuit of salvation, we in the UK must work harder to avoid the risks of isolation.
Labour leader Ed Miliband will tell the CBI conference later that pressure on David Cameron from eurosceptic Tories had forced the Prime Minister into "negotiations that will not deliver" for the repatriation of swathes of powers.
Instead he should be concentrating on "building alliances" to agree reforms and ensure Britain does not lose out when eurozone countries deepen their ties in a new two-tier Europe, he will suggest.
Miliband will say it is right to press for reform in some areas while remaining "passionate" that membership of the Union is firmly in the national interest.
Quitting the EU would leave Britain "competing on low wages and low skills, an off-shore low-value economy, a race to the bottom", he will say, pushing the economic, political and strategic case for membership.
Crises in the eurozone, soaring unemployment, and a budget more suited to the 1950s than the 21st century have shaken confidence in the Union, he will suggest.
"Too many have turned a blind eye to these failings, believing their understandable real passion for the case for Britain being in Europe should mean a passionate defence of the institutions of the European Union.
"The answer is not just to make the same old case for the European Union more loudly. We need to argue the case in a new way, not simply assume it as an article of faith."
New alliances are required to push plans for growth and jobs, re-target spending towards infrastructure, energy and innovation, complete the single market and change state aid rules, he will suggest.
But a rising tide of public scepticism and calls to consider a future outside the EU - including from within the Cabinet - had led allies in Europe to believe the "Britain is heading to the exit door".
"Those of us, like me, who passionately believe that Britain is stronger in the European Union cannot be silent in a situation like this.
"I will not allow our country to sleepwalk toward exit because it would be a betrayal of our national interest.
"Reforming the European Union will be difficult, it will require building alliances, and it will have its frustrations. But I am certain it is better than leaving: for business, for jobs, for wealth creation. Our future lies within a reformed European Union that will help us build One Nation."
Weekend opinion polls showed a clear public majority for cutting ties with Brussels as pressure mounted on the Prime Minister to set out plans for a referendum on the issue.
Writing in his column in the Daily Telegraph today, London Mayor Boris Johnson said the Prime Minister would be right to veto the EU spending package when he attends a summit this week.
"It may be impossible to cut the budget, since there is no other country actively proposing this excellent option. But there is no reason at all why EU spending should not be frozen exactly where it is.
"The worst that can happen is that the existing budget will be rolled over, a month at a time.
"It is time for David Cameron to put on that pineapple-coloured wig and powder blue suit, whirl his handbag round his head and bring it crashing to the table with the words no, non, nein, neen, nee, ne, ei and ochi, until they get the message."