David Cameron tells Greece: buy into austerity or get out of the eurozone

Prime Minister insists that world cannot afford to wait for answers on future of single currency

David Cameron has issued his bluntest warning yet to Greece that voters need to "meet their commitments" as a member of the eurozone in elections next month or leave the currency union.

Speaking at the Nato summit in Chicago, and ahead of a crucial meeting of EU heads of government on Wednesday, the Prime Minister said the eurozone must now prepare for either outcome and be ready for the repercussions of the Greek vote, set for 17 June. The poll was called after Greek parties failed to form a new government earlier this month – raising fears of a euro exit. "We are coming to a decision point where Greece is going to vote. It has to be absolutely clear there is a choice: they can vote to stay in the eurozone and meet their commitments, or they can vote to give up on their commitments and effectively give up on the eurozone," Mr Cameron said. No one could tell Greece's parties what to do, but he can have left them in no doubt of how he feels. "The choice Greece faces is maintaining its commitments and maintaining its place in the eurozone or deciding that's not the path it wants to take.

"What is required is decisiveness, strong actions by all governments – whether it's action to deal with deficits, to deal with the banks, to calm markets," he said. "The eurozone has to put in place the most robust contingency plans for both eventualities because the world is suffering from continued uncertainty in the eurozone. So this is a decision point."

Mr Cameron also defended the German Chancellor, Angela Merkel, whose insistence on austerity has been blamed for preventing the G8 summit from making progress. "Obviously she wants to make sure that countries in the eurozone that signed up to all sorts of commitments meet those commitments. She did show some flexibility in terms of what more can be done on the growth agenda."

The Justice Secretary Kenneth Clarke, a lifelong Euro-enthusiast, told Sky News that staying in the euro was still an option for Greece. "But if they get a lot of cranky extremists elected, they will default on their debt and everybody says they will leave the euro. For the Greeks, that will be disastrous. They will encounter real poverty," he warned.

While Mr Cameron and Mr Clarke appealed to Greek voters to face reality, the Deputy Prime Minister, Nick Clegg, pleaded with German taxpayers to be patient with the Greeks. Interviewed in Der Spiegel, he said: "Whilst I have a huge amount of sympathy with German taxpayers, it is not sustainable to believe that the eurozone can thrive through fiscal discipline alone. It also has at some level to include an ability to either share debt or to deal with shocks in one part of the system or the other through fiscal transfers."

Mr Clegg also lamented a lack of leadership in the eurozone, and the political instability which has brought down nine eurozone governments in three years. "This cannot carry on, because the combination of economic insecurity and political paralysis is the ideal recipe for an increase in extremism and xenophobia," he warned.

There was another warning against the risk of a forced Greek exit from the euro from the shadow Chancellor, Ed Balls. "If Greece does try to leave the eurozone in a disorderly way it would cause huge damage to the world economy, to the British economy, and to the eurozone economy, as the eurozone has not sorted out how to stop this crisis spreading to Spain and Italy," he told Sky's Dermot Murnaghan.

The crisis in Europe, combined with austerity at home, is proving corrosive for the British Government. A ComRes poll for yesterday's Independent on Sunday showed for the first time that David Cameron's personal rating is lower than Ed Miliband's, with only two-thirds of Conservative voters saying that he is a good Prime Minister.

The former Chancellor, Alistair Darling, claimed that the Government had added to the country's economic problems, causing a second recession by focusing on spending cuts instead of growth. "Reducing public expenditure at a time when businesses and individuals stop spending runs the risk of crashing the economy, and that's pretty much what's happened," he told BBC1's Andrew Marr Show.

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