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The chief executive of Barclays has warned that the bank would be prepared to abandon its proposed £41 million takeover of ABN Amro if it could not complete a deal on the right terms.

In a statement ahead of a shareholder meeting to vote on the proposed takeover, Barclays boss John Varley told investors that the bank would "not lose sight of economic reality in our pursuit of the merger objective".

"Putting that bluntly, that means being prepared to walk away if we can't conclude the transaction on the right terms," he added.

Mr Varley's statement comes amid speculation that Barclays is likely to fail in its attempt to secure ABN with its largely stock offer. Barclays' share price has been hit by the current turmoil on the financial markets, caused by fears over the extent to which the world's banks are exposed to bad debts in the US housing sector.

As such the value of Barclay's bid for ABN is now thought to be worth some 15 per cent less than a rival offer made for the Dutch bank by a consortium that includes the Royal Bank of Scotland.

But Mr Varley stressed today that the outcome of the takeover battle was still far from certain, claiming that the current stock market valuation of ABN indicated that there were "uncertainties in the period ahead for the consortium".

The Barclays chief added that the current value of ABN shares stands at an eight per cent discount to the consortium offer.

"So the stock market, which is seldom wrong about these things, is indicating at the moment that the outcome is far from certain," Mr Varley explained.

Meanwhile the Barclays boss took the opportunity to stress that the bank remained confident in its ability to generate good returns for shareholders over time, whatever the outcome of the battle to secure ABN.