DAVID Cameron issued a stark warning to eurozone leaders that they must put in place plans to protect their economies in case Greece drops out of the single currency.

He said Greek voters effectively face an in-out choice when they go to the polls next month in a re-run election amid fears crashing out of the euro could trigger a new global financial crisis.

The Prime Minister also denied the G8 summit at Camp David had been a failure by not delivering a plan for resolving the country's debt crisis.

The message, delivered in Chicago, where Mr Cameron is now attending a Nato summit, came as Cabinet colleague Ken Clarke said the European banking system was "in tatters".

Mr Clarke said Britain was "heavily exposed" to potential problems and could be among the next targets of market speculation.

Mr Cameron insisted the meeting at the presidential retreat had brought home to the eurozone leaders the need to deal with the issue.

He said: "We now have to send a very clear message to [the Greek] people: 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. The G8 [summit] helped to crystallise that thinking of the eurozone leadership and for that I think it was worthwhile."

Justice Secretary Ken Clarke, a former Chancellor, signalled that fresh elections due in Greece next month would be critical.

He said: "Greek voters really have to face up to reality. It is very, very difficult for them. They are having a terrible time.

"These are hardships inflicted on them by the irresponsibility of their former politicians 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 debt. "Everyone says they will leave the euro," he added. "Actually, that is quite likely, but doesn't necessarily follow."

He added: "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.

"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 Britain. Our banks are heavily exposed to some of these countries. I obviously hope the Greeks will vote responsibly and that we can avoid turmoil."