Crash and burn

Greece is engulfed in crisis – and its battles have only just begun.

Greeks do a good job of cleaning up. Over the past month, municipal workers have been on a mission to rid Athens of the angry slogans that appear overnight. These range from "Ugly cities burn beautifully" to "Let the plutocracy pay for the crisis" or, simply, "Destroy".

But graffiti is not all the cleaners have to contend with. Demonstrators leave a trail of debris: slabs of broken marble prised from pavements, smashed shop windows, wrecked bus stops, burned rubbish bins and leaflets denouncing the government's harsh economic austerity measures.

No amount of cleaning up can hide the scale of the crisis engulfing Greece. Economically, politically, socially and, some say, even spiritually, the country has reached a dead end. The failings of a near-bankrupt state built on cronyism, corruption, nepotism and greed have been exposed.Greeks, I think, always knew that things were going this way - a culture in which citizens strove to have at least two houses and three cars, but evaded tax collectors and often the law, couldn't be maintained for ever. The state had become as overstretched as its citizens; the bloated public sector, used by successive governments to trade jobs for votes, was always going to prove unsustainable.

Yet the current crisis has still shocked many. Financial turmoil hit soon after the socialist government revealed the real size of the public deficit in late 2009. At 12.7 per cent of GDP, the hole in Greece's finances is almost twice as big as the conservative government had claimed before its electoral defeat last October. This discovery and what it may mean for the eurozone's stability have left many Greeks reeling.

Now, Greece is being held up by the world's press as an example of how not to run a country. Some of its EU partners have accused the country of intentionally misleading the Union about its finances in order to enter the eurozone. Worse still, the crisis has exposed the inner workings of a society with little concern for meritocracy. Not since the collapse in 1974 of Greece's military government, the "colonels' regime", has the body politic been so shaken.

The ascent to power of the socialist Pasok party, led by George Papandreou, one of Europe's most progressive politicians, is a relief for those who want change. He has pledged financial reform, and to combat the country's "systematic corruption". But even senior government cadres seem overwhelmed by what must be done. On the seventh floor of an Orwellian building erected by the military junta, I met Michalis Chrysohoidis, the minister in charge of counterterrorism. The son of farmers from northern Greece, Chrysohoidis is a down-to-earth politician who was instrumental in bringing members of the notorious "17 November" guerrilla group to trial in 2003. Yet he was downbeat. It wasn't just that the previous government had undone Greece's recent progress, he said - its modernisation, the improvements to law and order. It was also how the public administration had been left. Political patronage meant civil servants had hidden a great deal. Files and figures on state finances had either gone missing or been fabricated. It was only when Pasok came to power that they discover­ed how serious the situation was.

The draconian economic policies announced in an effort to appease the EU and the markets (where Greece must raise roughly €54bn - £46.8bn - this year to service the country's €300bn debt) have stoked anger and fear. Chrysohoidis thinks that social unrest may get worse in the months ahead. "When people feel the effects of the measures in their pockets, the situation could deteriorate," he said.

Clawing back credibility

In Athens, the mood has become increasingly edgy, at times even violent. On 5 March, after a particularly nasty rally, protesters tried to storm the parliament. And there are concerns that armed extremists, exploiting the economic tumult, will also strike. In the same week, police narrowly thwarted an attack in a shoot-out with a man believed to be a prominent member of the far-left guerrilla group Revolutionary Struggle. Over the past few years, Greece's network of terrorists has grown. "There is a whole new generation, many from well-heeled families, who like to plant bombs and kill people," Chrysohoidis told me.

Papandreou realises it will take a revolution to reform Greece. The good news is that he is honest, decent and without doubt the most cosmopolitan politician to have led the country. The son and grandson of former prime ministers, he was brought up in the US, Sweden, Canada and the UK. Also the president of Socialist International, he has used his global connections to claw back some of Greece's lost credibility. Better still, he sees the crisis as an opportunity for change.

On 25 March, as Greece celebrates its 189th anniversary as an independent state, EU leaders in Brussels will decide whether to provide financial support for Athens. Aid is crucial to lowering the country's borrowing costs on the international markets. But Germany is reluctant to back EU assistance, without which Greece may be forced to go to the International Monetary Fund for help. Many in the bloc would regard that move as a breakdown in European solidarity, a blow to the Union's pride.

Whatever the outcome, this is only the beginning of Greece's battle - and it is one that will require much more than mopping up.