Greece could be forced to leave the eurozone as the price for the survival of the single currency, George Osborne warned yesterday.
The Chancellor suggested that Greece's departure could be required to convince German voters that it was worth bailing out the stricken currency.
"I ultimately don't know whether Greece needs to leave the euro in order for the eurozone to do the things necessary to make their currency survive," he said.
He added: "I just don't know whether the German government requires [a] Greek exit to explain to their public why they need certain things like a banking union, eurobonds and things in common with that."
European officials are drawing up a range of emergency measures to prevent a financial meltdown if Greece crashes out of the single currency in the wake of Sunday's national elections.
The revelations came as the leader of Greece's far-left anti-bailout Syriza party, Alexis Tsipras, renewed his appeal to European leaders to relent in their demands for savage public spending cuts.
Attempting to soothe the nerves of voters concerned that a Syriza victory could herald Greece's exit from the euro, Mr Tsipras said he was optimistic about renegotiating the country's rescue deal.
But European officials are working on measures to limit the fallout from a Greek exit including limiting the amount Europeans can withdraw from cash machines, restrictions on the movement of capital and a temporary suspension of the Schengen pact that permits free movement of people across the continent. "It is sensible planning, that is all," a source told Reuters.
Greece will vote for a second time on 17 June. The most recent surveys showed Syriza to be neck and neck with the pro-bailout New Democracy party. Yesterday, Mr Tsipras used the Spanish bailout, which was agreed with less stringent conditions, to push his message that Greece was being unfairly singled out.
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