delivered a stark warning about the consequences of Greece crashing out of the eurozone today, saying Europe's banking system was already "in tatters".
The Cabinet minister said Britain was "heavily exposed" to potential problems and could be among the next targets for market speculation....It is easy for the speculators to move to the next target because in the absence of banks providing ultra transparency market participants do not know how heavily exposed any bank or banking system is to potential problems.
Almost five years after the beginning of the financial crisis and the issue of contagion has still not been addressed let alone ended by implementing ultra transparency.
Mr Clarke, a former chancellor, signalled that fresh elections due in Greece next month would be critical.
"The Greek voters have really got to face up to reality - it is very very difficult for them, they are having a terrible time," he said. "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 debts as a result....Actually, the Greek people could, they should and they probably will vote to default on their debts and make their creditors absorb the losses.
He went on: "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.The fact that the EU banking system appears to be in tatters is a function of the policy choices made since the beginning of the financial crisis. Iceland made different policy choices and its banking system has recovered.
"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.
"Our banks are heavily exposed to some of these countries, we have recapitalised them so far...The decision to recapitalize the banks is a classic example of the failed choices that policy makers have made since the beginning of the financial crisis.
A modern banking system, with its deposit guarantees and access to central bank funding, does not need to be recapitalized by the government. The banking system is fully capable of absorbing the losses on the excess debt in the financial system today and rebuilding bank book capital levels by retaining future earnings.
Another former chancellor, Labour's Alistair Darling, warned Europe was in a "very dangerous position".
"It's going to take a crisis, an absolute crisis, to make Europe's leaders act. That's what happened four years ago. I'm afraid that's what's going to be needed in the future," he told the BBC's Andrew Marr programme.
Referring back to the unfolding of the banking crisis of 2008, he said: "That is how dangerous this cocktail is. I am very worried about it, because it could happen without notice.
"I don't think whilst Europe could deal with Greece, it would struggle to contain Spain and if it spread wider than that, I think it would be in real difficulties."The critical question is will Europe's leaders repeat the same failed policies from four years ago or will they adopt the Swedish model with ultra transparency and end the financial crisis.