We must prepare for Greek exit, says Andrew Tyrie

As the Group of Seven major economies (G7) held an emergency conference call about the Eurozone crisis yesterday, Andrew Tyrie, chairman of the House of Commons Treasury Select Committee, called for a robust contingency plan for Greece to exit the single currency.

In strongly worded comments, the Conservative MP for Chichester said there was now little option but to prepare for a Grexit.

"We should therefore take advantage of the breathing space afforded by the latest bailout to develop a contingency plan for Greece to leave the Eurozone," he added.

"The fundamental issue troubling the market is not the liquidity of government securities markets but the solvency of government finances. The European Central Bank can't solve the problem, and shouldn't try."

Mr Tyrie's comments came as the US Treasury Department issued a statement that disappointed the markets with its lack of substantive detail. It said the G7 had reviewed developments in the global economy and financial markets and agreed to monitor developments closely. It also discussed progress towards greater financial and fiscal union in Europe.

The conference call came after Spain called for external funding for the first time as budget minister Cristobal Montoro said European institutions should help shore up Spanish banks.

Mr Tyrie also added his voice to mounting concerns about the future of the Spanish economy yesterday.

"The markets doubt the capacity of the Spanish government to service the debt. Among other things, they doubt whether the Spanish tax system can raise the necessary revenue while the government simultaneously engages in deep structural reforms needed to improve productivity and secure internal devaluation," he said.

"Without those enduring reforms, another Eurozone crisis would emerge in time, even after a bailout."