The UK will "prepare for the worst" after Greece became the first developed nation to default on an IMF loan, George Osborne said.
The Chancellor insisted the Government will do "whatever is necessary" to protect the economy as Greece was left teetering on the brink of financial meltdown after failing to make the 1.6 billion euro (£1.1 billion) loan repayment.
Mr Osborne said: "The failure of the Greek government to make its scheduled payments to the International Monetary Fund, and the expiry of Greece's financial assistance programme, have served only to add to the developing crisis in that country.
"It is vital now that the current uncertainty is resolved, whatever the Greek people decide, to ensure economic and financial stability across Europe.
"Britain's attitude to this developing crisis is clear: we hope for the best, but we prepare for the worst, and we stand ready to do whatever is necessary to protect our economic security at this uncertain time."
Finance ministers from eurozone countries are due to hold a conference call to discuss yet another proposal from the Athens government.
But there are doubts over whether progress can be made after German Chancellor Angela Merkel refused to consider releasing emergency funds from the eurozone stability mechanism before the Greeks hold a referendum on Sunday.
The left-wing Syriza government, elected on an anti-austerity platform, has been in talks for months with its Troika of creditors - the IMF, the European Central Bank (ECB) and the European Commission. Greek prime minister Alexis Tsipras has urged the country to vote against demands for spending cuts and tax rises in the national poll on Sunday.
However, EU leaders have warned that a rejection would effectively mean Greece leaving the eurozone.