PM Warns Greece June Vote Is About Eurozone

The Prime Minister has warned Greece that its new round of elections must be a vote about staying in the eurozone.

David Cameron insisted failure to provide clarity at the ballot box on June 17 could prove disastrous for the world economy.

His message came as his Cabinet colleague Ken Clarke said the European banking system was already "in tatters".

Mr Clarke also warned that Britain was "heavily exposed" to potential problems and could be among the next targets for market speculation.

The warning from Mr Cameron comes while he is in America for back-to-back G8 and Nato summits, where talks with fellow world leaders have "crystallised" the problems.

"We now have to send a very clear message to (the Greek) people," Mr Cameron said.

"There is a choice, you can either vote to stay in the euro with all the commitments you have made, or, if you vote another way, you are effectively voting to leave.

"The crucial thing is that eurozone leaders have to put in place contingency plans for both of those eventualities - really clear plans to keep our economies safe and stable."

He added: "What I think would be bad for Greece, bad for Europe, bad for the world would be if we just allowed the can to be kicked down the road with an inconclusive outcome," he said.

"It has just got to try and make sure that this is a moment of clarity and decisiveness for the eurozone."

Mr Cameron indicated that German Chancellor Angela Merkel - who has driven the demands for austerity and fiscal discipline within the eurozone - had shown signs of a willingness to compromise.

"I think she did show some flexibility in terms of what more can be done on the growth agenda and also what more can be done to handle the risks inside the eurozone," he said.

"The fact that you have got countries like Japan, America, Canada round the table, as well as Britain, who are outside the eurozone but affected by what happens inside the eurozone, I think, was helpful in bringing that important pressure to bear."

Mr Merkel's softening approach comes after new French President Francois Hollande stood firm on his election promise of avoiding more austerity cuts in France.

Deputy Prime Minister Nick Clegg also criticised the lack of leadership on the eurozone crisis, saying it risked a rise in extremism and civil unrest.

He said: "This cannot carry on, because the combination of economic insecurity and political paralysis, we know this from the history of our continent, is the ideal recipe for an increase in extremism and xenophobia.

"Some of the answers are under our nose. Some of the answers - about creating more jobs, more prosperity, more competitiveness by completing the single market - is something we should have done 20 years ago.

"It is unforgivable that European leaders still meet every few weeks and issue declarations about completing the energy market, energy liberalisation, completing services liberalisation; and they don't do it."

Meanwhile, Justice Secretary Mr Clarke, a former chancellor, said that Greek voters had to "face up to reality".

"These are hardships inflicted on them by the irresponsibility of their former politicians," he said.

"But they cannot just vote for saying 'Could people just carry on giving us some money so we do not have to change anything.'"

Mr Clarke said the consequences would be "serious" if the Greek people elected "cranky extremists" and defaulted on their debts as a result.

"No-one knows exactly what will happen in the rest of Europe. But the banking system is in tatters. It is weak in very many places," he went on.

"We don't know what the knock on effects would be, they could be very serious and of course people will start barking at the door of Portugal, Ireland, Italy and here in Britain.

On Sunday, the shadow chancellor Ed Balls told Sky's Dermot Murnaghan that it would cause "huge damage" if Greece made a disorderly exit from the eurozone.

Mr Balls said: "Greece needs to stay in for at least as long as the eurozone needs to sort its act out - and I am afraid that is taking a very, very long time."