As Greece’s finance minister, Yanis Varoufakis won fans with his leather jacket, abrasive wit and swashbuckling battles with the EU. Six weeks on from resigning, and with a snap election just announced, what now for the bad boy of anti-capitalism?

The island of Aegina is just 17 miles from Athens, a mere 40 minutes’ dash on a hydrofoil. Owing to its proximity to the Greek capital, it’s less a tourist island than a second-home sanctuary for wealthy Athenians, but it boasts several impressive classical sites and a distinguished history. Not only was it briefly the capital of a newly liberated Greece in the 19th century but back in the 7th century BC it was the first Greek state to mint its own coins.

Given Greece’s current predicament, trapped in the euro and an ever-expanding debt crisis, that last fact is a monetary irony not lost on one particular Athenian on Aegina. Sitting on top of a hill a few minutes’ drive from the port is the holiday home of Yanis Varoufakis. He is the former finance minister of Greece, although that’s hardly a description that befits the man’s legend. Gikas Hardouvelis is also a former finance minister of Greece, but no one has heard of him.

It would be more accurate to say that Varoufakis is the former finance minister of Greece who took on the global banking system, the European political elite and, in the minds of many, the great god of capitalism itself. His is a story so full of drama and symbolism that it contains more than a hint of Greek myth.

An economics professor by occupation, he went in a few months from the comfortable obscurity of academia to become one of the most recognised politicians on the planet.

Tall, muscular, with intense dark eyes and a Nosferatu-like shaved head, he was an instant gift to the world’s media. When the leader of the leftwing Syriza party and newly elected Greek prime minister Alexis Tsipras appointed him finance minister back in January, Varoufakis promised on his personal website to maintain the output of his forthright opinions. And he didn’t disappoint. He compared the eurozone to the Eagles’ Hotel California – “You can check out anytime you like, but you can never leave”. He described the austerity measures imposed on Greece as “fiscal waterboarding” and suggested that what Greece’s creditors were doing to the country amounted to “terrorism”.

He didn’t look like a finance minister, a role traditionally associated with reassuring dullness. With his open-necked shirts and smouldering presence, he looked more like a Hollywood action hero or the star of an advertising campaign for close-shave razors. A Portuguese MP spoke for many when she declared: “Damn, the Greek finance minister is sexy.”

Sex and money: it’s a combustible combination. It seemed like it couldn’t last, and it didn’t. On 6 July, the day after the Greeks rejected austerity in a hastily organised bailout referendum, Varoufakis was forced to resign by Tsipras. It was a strange moment for Syriza, and most particularly Varoufakis, that almost simultaneously combined convincing victory with abject defeat. The Greek people, stirred in part by the finance minister’s fiery speeches, had spoken and delivered a slap in the face for the European authorities.

But what did it amount to? Democracy in action without a doubt, though presumably that did not mean the Greeks had a democratic right to determine how much of their debt other democratic states had to shoulder. The German finance minister Wolfgang Schäuble was quoted as saying that “elections cannot change anything”, a statement that was seen as the last word in undemocratic. What he was trying to say was that each nation had to submit to the rules regardless of national votes, otherwise no system would work.

The problem is, the current system doesn’t work either. It seems designed only to delay the inevitable. This was Varoufakis’s message and it was one the Eurogroup of finance ministers was sick of hearing. They wanted him out, and perhaps Tsipras had also grown tired of the manner in which Varoufakis conveyed the message.

Facebook Twitter Pinterest Varoufakis leaves on his motorcycle with his wife Danae Stratou after resigning on 6 July 2015. Photograph: Louisa Gouliamaki/AFP/Getty Images

In any case, he resigned and the Greek government made a volte face, agreeing terms with its creditors, the so-called troika of the European Union, the European Central Bank and the International Monetary Fund, that were even less favourable than those Varoufakis had consistently rejected. Varoufakis was one of 32 Syriza MPs who voted against the deal, and thus against Tsipras, in the Greek parliament.

Last week Tsipras, unable to maintain a governing majority in the face of his party rebels, called a snap general election and resigned. “The political mandate of the 25 January elections has exhausted its limits and now the Greek people have to have their say,” he announced. “I want to be honest with you. We did not achieve the agreement we expected before the January elections.”

After the brief sense of jubilant defiance that followed the referendum, the Greeks are confronted with a reality that is unforgivingly stark. The economy is rapidly shrinking, their already large-scale unemployment is growing, and the stock exchange, suspended at the height of the crisis, was in freefall before making a partial recovery after an agreement on the bailout was reached. Faced with a rebellion from his own party, Tsipras was looking at calling a snap general election as this piece went to press, with the Athens stock market once again plummeting.

Despite the misleading setting of the holiday sun and the glistening Aegean sea, the anger in Greece is palpable. Much of it is directed at Europe, and in particular the Germans, but also at the Greek political system, for so long a corrupt and dysfunctional entity.

Varoufakis has been a longtime and consistent critic of Greek politics, its ruling oligarchy, its widespread tax evasion and endemic corruption. Yet it is he who may now face criminal charges, including high treason, for allegedly hacking into tax accounts to arrange contingency plans for the introduction of a new currency.

Facebook Twitter Pinterest ‘They were not prepared to acknowledge that the programme they had imposed upon Greece was a failure’: Yanis Varoufakis, August 2015, Aegina. Photograph: Nikos Pilos

Everyone has an opinion on Varoufakis. Some, like a restaurateur I spoke to near the Aegean port of Volos, spat out his name in disgust: “Stupid, stupid, stupid man!” Others, like a taxi driver on Aegina, see him as a lone voice of decency and justice. But perhaps the most common opinion is that he is a master of theory who was not able to deal with the complexity and compromises of the real world.

Even members of his own party have echoed this view. As the Syriza MP and vice-president of the house Alexis Mitropoulos put it: “With his loquaciousness, with his naivety, with his zeal to prove his ideas more than anything else, it seems that he hurt the Greek issue.” As the accusations flew, and with a criminal investigation under way, Varoufakis retreated in early August to Aegina for some much-needed rest and recuperation.

The suntanned man who meets me at the driveway to the handsomely appointed high-modernist holiday house looks the picture of relaxed cool in a crisp white shirt and blue jeans. He explains that the house is not his, but was built by the family of his wife, the artist Danae Stratou.

We sit overlooking the pool, which in turn overlooks the turquoise sea and the islands of the Peloponnese fanning out majestically to the south. It’s fair to say that the setting is not one that lends itself to profound reflections on the privations of austerity.

That’s a cheap shot, though, because neither Varoufakis nor Stratou come across as smug or complacent. Earlier this year they allowed themselves to be photographed by Paris Match in their smart Athens apartment. It was an uncharacteristically crass move and Varoufakis has owned up to the mistake. It wasn’t so much the chic surroundings as the couple themselves that proved most damning. They are notably attractive: he dark and dramatic; she blue-eyed, blond and coolly stylish. It’s one thing to be wealthy, but beautiful too? That’s asking for envy.

Yet given their privileges and good fortune, they’re engagingly warm and down-to-earth people. There are two pop facts from their student days that have done the rounds about the couple, who are both on their second marriages (Varoufakis has a young daughter, now living in Australia, from the previous marriage, and Stratou has grownup children from her first marriage.)

Facebook Twitter Pinterest The Greek presidential guard conduct their ceremonial march against a backdrop of anti-austerity protest in front of the parliament building in Athens on 21 June. Photograph: Milos Bicanski/Getty Images

When he studied at the University of Essex, Varoufakis, aside from being a member of the British communist party, was leader of the Black Students’ Alliance. He jokes about it now, recalling that he used to say that black was a state of mind and “we Greeks are the blacks of Europe”. And Stratou, who studied sculpture at St Martin’s College, is said to be model for the girl in Pulp’s Common People who “came from Greece” and “had a thirst for knowledge”.

Both anecdotes suggest a tendency towards slumming it that doesn’t do justice to the work, effort and commitment they have both given to their respective causes – Varoufakis in his failed attempt to rescue Greece from its debt burden and Stratou to supporting her husband. In Aegina the couple looked like two people who had slept through the night for the first time in months. But a holiday is only a temporary escape from reality, and elsewhere in the country reality is working overtime with frequently heartbreaking results.

As a chorus of cicadas fill the warm scented air, I remind Varoufakis that the situation in Greece is now worse than when he was appointed minister at the beginning of the year. At the end of 2014, the Greek economy was judged to be growing and since Syriza’s victory it had gone into sharp reverse. Does he feel any responsibility for that predicament?

He presses his fingers together, as if momentarily in prayer, and says in his perfectly precise English: “At the risk of sounding arrogant, absolutely not. The reason is very simple.”

He explains in a series of declarative sentences, constructed with faultless logic, that in 2010 Greece went “spectacularly” bankrupt and Europe has consistently refused to confront this reality because the monetary union was never designed to deal with such an eventuality. All sorts of places can effectively go bankrupt – the north of England, for example, he says – but as long as there are the surplus-recycling mechanisms of a unitary state, then the situation can be remedied. But Europe has no such provision for default.

“And what do you do when there is no provision for default?” he asks in the rhetorical style of an economics lecturer. “You behave like truly scandalous bankers. They extend a loan that has turned bad and pretend that it is not bad and give good money after bad money. So the largest loan ever in history, in absolute not relative terms, was given to the most insolvent state in the eurozone.”

He calls the European policy that has operated since 2010 “extend and pretend”, in which Greece is lent money it can’t afford to repay to enable Europe to remain in denial about the dysfunction of the eurozone.

“So we put it to the Greek people that this downward spiral needs to end, by speaking truth to power and electing a government that goes to Brussels and says: ‘Folks, this can’t go on. Let’s have a rational approach to this.’”

Very few, if any, economists or observers would, in the strictest sense, quibble with that. And most would agree that the conditions of austerity under which the original loan and subsequent instalments were made have only helped hobble the Greek economy. Plenty too would also concur with his assessment that the debt Greece owes has effectively been transferred by European political authorities from private banks to the public purse – hence the animosity towards Greece, for instance, felt by German taxpayers.

Much of this Varoufakis predicted and argued against, as indeed he argued against Greece joining the euro in the first place. But it’s the analysis of a detached observer rather than a politician at the heart of the deal-making of the previous six months. His detractors maintain that as finance minister he had the opportunity to improve a bad set of circumstances, but succeeded only in exacerbating them.

“He’s extremely confrontational,” says Yannis Palaiologos, a journalist with Kathimerini, a right-of-centre Greek newspaper. “Comparing troika members to CIA torturers and that sort of thing was never going to help. He took a situation at the beginning of January that was really improving – with the economy set to grow 3% – and there was sympathy for debt relief. If someone who was conciliatory came in then he could have got [debt relief]. Instead he chose to talk about a “huge and unpayable” debt – which sovereign debt is paid in full anyway? Countries are not companies – antagonising creditors and getting everything off to a very bad start.”

This reading of Varoufakis sees him as vain, intransigent and oblivious to the effect his combative public stance had on negotiations. I outline this position while he sits in silence listening and nodding. Then he smiles, signifying not amusement but the satisfying knowledge that, already right in his own mind, he has only to complete the undemanding task of explaining why.

“Well I wish,” he begins, “I really truly wish I could look you in the eye and say that had we played it more conciliatory, we could have had a decent deal. I’m afraid I can’t. If you look at the transcripts of my depositions and my interventions at the Eurogroup meetings you will see nothing but complete openness to ideas and genuine attempts to find common ground, and a readiness to compromise. I put it to you very bluntly, Andrew: they were not prepared to acknowledge that the programme they had imposed upon Greece was a failure.”

He disputes the notion that the Greek economy had been on the mend prior to Syriza taking power, claiming that as both incomes and prices were falling, the idea that there was real growth was a “statistical mirage” made meaningless by the ever-deepening national debt.

To listen to Varoufakis in full flow is an exhilarating experience. He is articulate, impassioned, persuasive and entertaining. His use of language, except when he strays into academic jargon, is seldom less than vividly expressive. And he delivers it all with a winning amount of personal charm. It’s this quality, manifested in an appreciation of the ridiculous (he cites Monty Python as an important political influence), that just prevents his intellectual confidence from brimming over into arrogance.

Still, it’s hard to imagine that labelling those on the other side of the negotiating table as terrorists was ever going to prove a helpful tactic in the task of securing debt relief from them. The common assessment of his approach is that Varoufakis had been promoted above his political league.

Aside from a brief stint from 2004-2006 as an economic adviser to George Papandreou, then leader of the Greek opposition, and later prime minister in the late 2000s, Varoufakis had spent his adult life as a peripatetic academic, serving periods at several British universities, including Essex and East Anglia, as well as spells at Athens, Sydney and Austin, Texas.

But another way of looking at it is that Varoufakis, an expert on game theory, was playing a high-stakes game of brinkmanship, in which he tried to bypass the negotiators and, by rallying popular support in Greece, exert influence on the European political leadership.

“It wasn’t that we ever expected the troika to see the error of their ways,” he admits. “We expected the European partners to intervene, and in particular Chancellor Merkel.”

Facebook Twitter Pinterest Greek prime minister Alexis Tsipras, whom Yanis Varoufakis still calls a ‘good friend’, despite his part in Varoufakis’s resignation. Photograph: Panayiotis Tzamaros/Panayiotis Tzamaros/NurPhoto/Corbis

The “we” refers to Alexis Tsipras, whom Varoufakis makes clear was in unwavering agreement with his strategy. He refers to Tsipras as his “good friend”, but you sense that it’s a friendship that may have been tested beyond recovery. Certainly Stratou gives the coded impression that her husband was let down or betrayed by his erstwhile colleagues.

Of course, in the end the European leaders, and specifically Merkel, didn’t intervene. One reason for her sitting on her hands was that Greece had become extremely unpopular in Germany. The image of spendthrift, tax-avoiding Greeks didn’t play well in a nation that likes to celebrate hard work and economic discipline. And here, I think, Varoufakis’s antagonistic posture did not serve his actual aims well.

Syriza was welcomed into power by radicals and progressives around the world as a long-overdue stand against the inexorable march of “neoliberal” capitalism, and the fatalistic politics of Tina (“there is no alternative”). In Spain, the leftwing Podemos party hopes to ride the same rejectionist wave, and Jeremy Corbyn’s campaign for the Labour leadership is propelled by similar aspirations.

Yet if Varoufakis was the most visible face of this rebranded resistance, he was never under the illusion that he was seeking to bring down the global order. A self-styled “erratic Marxist”, he may be fully apprised of capitalism’s contradictions, the ones that Marx predicted would prove fatal, but he neither thinks the Greeks voted for a revolution nor is he seeking to launch one himself.

“I don’t believe that the time of depression is a revolutionary time,” he says. “The only people who benefit are the Nazis, the racists, the bigots, the misanthropes. Let’s be honest about this. Our left, our radical party, did reasonably well, not because we were left but because we managed to capture the imagination about the importance of ending the extending and pretending, not because those who voted for us wanted socialism.”

The irony, he says, is that he wanted to reform the Greek system to stamp out tax avoidance and corruption. “I think we were the best chance Europe had to fix the tax system in Greece,” he says, noting that it was the old political establishment that had allowed, and personally exploited, the widespread negation of tax payment.

His proposed policy was what he calls “standard Thatcherite or Reaganesque” economics of reducing taxes to increase collection and revenue. But again, he insists, the troika thwarted his plans because, according to him, they wanted nothing short of “regime change”. Whether or not this is true, and it’s impossible to verify, what is perhaps more intriguing, and certainly more neglected, are the limitations of Varoufakis’s ambitions.

For all the swagger and the willingness to “tell truth to power”, he has little time for leftwing fantasies of revolution. Statou insists we take a break and sets out a lunch of vegetarian moussaka, beans and salad. But over a bottle of white wine Varoufakis tells me of his father, an industrialist and unswerving leftwinger to this day, who was interned in the 1940s during the Greek civl war, when communists and sympathisers were locked up in their thousands.

He comes from radical traditions on both sides of his family, yet unlike many anti-capitalists, he is clear-eyed that leftwing revolutions have an appalling track record. “The idea that you allow capitalism to collapse under its own contradictions and we storm the Winter Palace and take over… well, we’ve tried that and the result was a dystopia.”

So what, then, is the future of radical politics if it’s not overthrowing capitali sm? Rather like Marx himself, Varoufakis is a little vague about what comes next. That’s not necessarily a bad thing. Marxism can be a sharp tool for diagnosis but, as so many of Marx’s followers have proved, a depressingly blunt one when it comes to prescription.

Our best hope, Varoufakis suggests, lies with the liberating effects of hi-tech developments such as 3D printing, which will transform the means of production and social relations. Or as he puts it in language that could double as parody: “The social inefficiency of capitalism is going to clash at some point with the technological innovations capitalism engenders and it is out of that contradiction that a more efficient way of organising production and distribution and culture will emerge.”

Leftwing parties still need to defend the poor and underprivileged, he says, but they must also embrace young internet whiz-kids who don’t care about the left or Marx or people like Varoufakis. “Unless the left does that,” he says with a final flourish, “the left is doomed.”

In defence of Yanis Varoufakis Read more

As we finish lunch, we talk about his future plans. He’s dismissive of the criminal investigation against him, which he says doesn’t bother him in the slightest.

“I think it’s going to fizzle out. However if I’m prosecuted and convicted of high treason, it would be interesting. For what? Saying no to an agreement that the troika itself considers to be unsustainable? Or indeed for having tried to come up with a defensive plan against threats they were making? In a sense, I would very much like it if it came to it because I would be able to expose them for what they are.”

As for the idea that he hacked into private tax accounts, he says there’s nothing secret about tax files. “Let’s say I know your tax file number, so what? They would have to come up with a charge that I tried to create reserve accounts for people to put money into them. OK? Guilty.”

He says he’s not going to return to academia for the time being – although if and when he does, you can imagine that he’ll be in a great deal more demand than he was when plying his trade, largely uncelebrated, in Athens, Sydney and Austin.

“I’m a member of parliament, let me remind you, and my commitment to my voters was that I’m not going to abandon them, come what may,” he says, sounding for the first time in our conversation like a politician rather than a theoretician.

Can he envisage returning to government?

“Yes,” he says, straight away.

Would he like to?

Facebook Twitter Pinterest ‘We can have a lot of fun even during miserable times’ …Yanis Varoufakis on the steps of his holiday home, Aegina. Photograph: Nikos Pilos

“Depends on the government,” interjects Stratou.

He gives her a look, as if she’s said too much, and then tells me that serving in a government is like becoming head of an academic department: it’s something the appropriate person should only do reluctantly.

I don’t believe this. I think Varoufakis is the sort of political animal who, having tasted power, will not be content to return to the sidelines. He has economic theories that he’s determined to prove will work in practice. It’s that determination, of course, that his critics say was his undoing, but it’s also what made him stand out in a grey and uniform world of political conformity.

A couple of weeks later, Tsipras makes his surprise move and resigns in preparation for a new election and, he hopes, a new mandate. He and Varoufakis have maintained a wary truce, occasionally offering implied or mildly explicit criticisms but on the whole steering clear of an outright conflict. But the election manoeuvre seemed to break the bond of loyalty and mutual constraint.

In an email to me two days ago, Varoufakis wrote: “Tsipras made a decision on that night, of the referendum, not only to surrender to the troika but also to implement the terms of surrender on the basis that it is better that a progressive government implement terms of surrender that it despises than leave it to the local stooges of the troika who would implement the same terms of surrender with enthusiasm.”

For Varoufakis it would have been better to “retreat to opposition” than go along with the terms because they will force the party to “mutate” into the very thing it set out not to be.

“For it is clear,” he continued, “that once you start implementing policies it becomes untenable to say constantly, ‘I am passing Law X through parliament even though I think it is toxic.’ At some point either you resign or you remove the cognitive dissonance by beginning to believe that Law X ain’t that bad; perhaps it is what the doctor ordered.’ This mutation I have already witnessed. Those in our party/government who underwent it, then turned against those who refused to mutate, the result being a split in the party that our people, the courageous voters who voted NO, did not deserve.”

He believes Tsipras has fallen prey to his advisors and his ego and is looking to become the “new De Gaulle, or Mitterrand more likely”. What is more, the snap election is a means of purging the party of dissent, Varoufakis argues, because if elections are held less than 12 months after the previous election, the candidates are produced by a leader-specified party list. In that case, the earlier the election the better for Tsipras, says Varoufakis, “as every week that passes . . . weakens his support with the electorate.”

A formal split and the break-up of Syriza is now underway. Reports in the Greek press say that 25 Syriza rebels will form a new party, Leiki Anotita (Popular Unity), led by by former energy minister Panagiotis Lafazanis. It doesn’t appear Varoufakis will join the new party, but nor does he seem willing to line up alongside Tsipras. “I will not stand with his party,” he says, “but I’m not going into the business of attacking him as a matter of course either.”

Today Varoufakis is making his first major speech since the fallout. It’s not in Greece but at a political rally in Frangy, France. “This is a European fight and it has to be waged on a European stage.” His target, he says, is Tina. He aims to show “what alternatives we had (and didn’t take) and have for the future.”

A fortnight earlier on Aegina, the three of us, having finished lunch, look out over the stunning view before us. Not for the first time, I think about how distinctively rugged and – yes – unspoilt Greece’s sun-scorched highlands and islands are. The country’s entry into the eurozone was also like a moral tale from classical mythology. For a nine-year period, from 2001 to 2010 all rules of economics were suspended as the Greeks enjoyed the prosperity that had previously been the preserve of their northern European neighbours. And then the gods called time and presented the unpayable bill.

Since then the belt has tightened so fast that, as one Athenian taxi driver quipped, each time he drives past the Acropolis, he checks to see if it hasn’t been taken away and sold. The final morality subplot has been the story of Syriza, the struggle to be a radical voice of resistance that, in the heat and compromise of government, has led to an outcome that has characterised the history of the left: the split between pragmatists and idealists. Varoufakis saw himself as a pragmatist when he joined the government, but he couldn’t help behaving like an idealist.

Greece, for all its problems, I say, is a remarkably beautiful country.

“Some people can’t forgive that,” says Danae.

“The thing that they can’t forgive,” adds her husband, “is that we can have a lot of fun even during miserable times.”

The times are indeed miserable in Greece, and they don’t look too bright elsewhere in Europe, but whatever else may be said about Varoufakis, a man of high ideals and exuberantly low insults, he cannot be accused of short-changing us on fun.

Yanis Varoufakis will be in conversation with Pablo Iglesias, the leader of Spain’s Podemos, at Central Hall Westminster in London on Friday 23 October, a Guardian Live event. Click here for details

• This article was amended on 27 August 2015 to correct the date of the Live event at Central Hall Westminster.

