Corbyn said Varoufakis would advise Labour in 'some capacity' this week

He insisted he failed in Greece only because of the 'despotic EU'

Yanis Varoufakis has insisted he is not an advisor to Jeremy Corbyn despite the Labour leader welcoming his role this week

Former Greek finance minister Yanis Varoufakis today claimed he was not an 'advisor' to Jeremy Corbyn and hit back at George Osborne for attacking the suggestion he was.

Mr Varoufakis said he would be 'engaging' with Mr Corbyn and the Labour Party - but insisted he was also in contact with Tory Norman Lamont and Green MP Caroline Lucas.

And in a magazine column he offered advice to Mr Corbyn on tackling Europe's 'Doom Loop', warning austerity was a symptom of the wider problem.

Mr Varoufakis penned an open letter to Mr Osborne after the Chancellor mocked his role earlier this week, deriding him for a 'cheap shot' by using comparisons with Chairman Mao and Mickey Mouse.

He said the intervention would help the Brexit camp - something he said he did not want.

Turning to Labour, Mr Varoufakis said the eurozone crisis and the referendum offered the party a 'golden opportunity'.

He said a 'doom loop' of 'economic malaise' undermined the potential for 'high quality debate' on how to address the 'systematic economic crisis'.

He said twin 'vicious cycles' in economics and politics were pushing Europe into a 'perfect storm'.

In the Newsweek column, Mr Varoufakis said: 'The Labour Party has an instinctive urge to protect those left behind by the long years of uneven private-debt-fuelled growth and its austerian aftermath.

'This is good and proper. However, it would be a mistake to waste Labour’s energies on tirades against austerity.

'If I am right that austerity is a symptom of low investment... Labour should concentrate on policies that will shift idle savings into investment funding, engendering new technologies that produce green, sustainable development and high quality jobs.'

The Greek was even too radical for his country's ruling Syriza party, dramatically quitting the government in the midst of the Greek debt crisis last summer after accusing the EU of pursuing 'terrorism' in its demands that his country impose strict austerity in exchange for another bailout.

The former Greek finance minister had a brief but high profile spell on the front line of EU politics, often being seen arriving at meetings on his motorbike, pictured last summer

But this week Mr Corbyn said his role at the heart of the debt negotiations with the EU puts him well-placed to advise the Labour party on how it can 'challenge the notion' of austerity.

The Labour leader revealed in his local newspaper that Mr Varoufakis will advise the party in 'some capacity' and said he had met Shadow Chancellor John McDonnell.

'I think the way Greece has been treated is terrible and we should reach out to them,' he told the Islington Tribune.

'I realise we're not in the Eurozone but it's a question of understanding how we challenge the notion that you can cut your way to prosperity when in reality you have to grow your way to prosperity.

'So all of our emphasis and work and campaigning is about an expanding economy and investing in an expanding economy.'