Greece’s former finance minister, Yanis Varoufakis, acting on his promise to take mainstream politicians to task, has announced the formation of his own party.

Varoufakis, 57, said the grassroots party would seek to “bring realistic hope” to the debt-ridden country. It will be known as MeRA 25 and has the overarching aim of releasing Greece from “debt bondage”.

“We will not mince our words,” he announced at the party’s launch event in a theatre hall in Athens. “[Our alliance] will be people of the left and liberalism, greens and feminists.”

The initiative extends the DiEM25 (Democracy in Europe Movement 2025) that Varoufakis co-founded in February 2016 with a view to contesting EU elections. Present in seven European countries, DiEM25 has urged members to engage in “responsible disobedience” while advocating a new deal for a continent still grappling with the fallout from the 2008 global crash.

Varoufakis, an economist who was the Greek finance minister between January and June 2015, at the height of the eurozone debt drama when the leftist Syriza party first assumed power, has emerged as one of the EU’s fiercest critics.

Exploiting his six-month stint at the high table of European economic decision-making, he has lobbed verbal salvos at Brussels repeatedly denouncing its lack of “genuine democratic processes”. He argues the bloc is ripe for crisis because its economic architecture is woefully inadequate.

Insisting that successive bailouts – and the brutal austerity cuts attached to them – had been a failed recipe for Greece’s economic recovery, Varoufakis said the country was living as a “debtors’ colony”.

“Our young people have to learn to live on €400 a month or look to emigrate. We will not repatriate them with debt relief alone as [the creditors] are promising us,” said Varoufakis, who has returned to his teaching post at Athens University. “Once your human capital has left, you are bereft.”

The Greek government’s current narrative of a “clean exit” from bailout supervision – when Athens’ third EU and IMF-sponsored rescue programme ends this summer – would never happen, he claimed.

By resorting to the solution of extending repayment timetables, it had condemned itself to decades of more austerity. In such circumstances, investors and growth had almost zero chance of success, said Varoufakis.

Greece has the highest debt to GDP ratio in the eurozone, at 180% of GDP. MeRA 25’s first proposal is to drastically restructure the debt mountain.

Although Varoufakis has a following worthy of a rock star in Europe, he is a controversial figure in Greece, where many blame his bungled handling of negotiations with the EU for the severe price the country has had to pay for its third, €86bn bailout.

However, his call for citizens to re-engage in active politics may appeal to many Greeks disaffected by the prime minister, Alexis Tsipas, and the about-turn his once fiercely anti-austerity party has made in office. Varoufakis won a record number of votes when he first ran as MP in 2015.