Anarchy erupts in Greece as austerity bites

As Thessalonika riots, a town near Athens spins out of control with angry residents setting up massive roadblocks and hurling Molotov cocktails

As explosions boom, the town's loudspeakers blare: "Attention! Attention! We are under attack!" Air-raid sirens wail through the streets, mingling with the frantic clanging of church bells. Clouds of tear gas waft between houses as helmeted riot police move in to push back the rebels. This isn't a war zone, but a small town just outside Athens. And while its fight is about a rubbish dump, it captures Greece's angry mood over its devastated economy.

As unemployment rises and austerity bites ever harder, tempers seem to fray faster in Greece, with citizens of all stripes thumbing their noses at authority. Some refuse to pay increased highway tolls and public transport tickets. There has been a rise in politicians being heckled and even assaulted. Yesterday, in Thessalonika, scores of activists were arrested after violent clashes with police.

The anger is most palpable in Keratea, a town of 15,000 people 30 miles south of Athens which appears to have spun out of control. The state's attempt to start work on a planned landfill site on a nearby hillside in December caused locals to set fire to construction vehicles and erect massive roadblocks on a road that bypasses the town and runs to the capital. It's a fight that has galvanised the town, from the mayor and the local priest to shopkeepers, farmers, schoolteachers and teenagers.

Over the past four months, locals have developed increasingly inventive roadblocks to stop contractors from getting to the site. They have parked trucks across the street and built piles of rubble and dirt. Apparently in it for the long haul, they have erected a wooden hut by the side of the road to serve as protest headquarters, complete with campaign posters, news clippings and children's drawings of the riots. Their latest move was a nocturnal expedition to dig a shoulder-deep trench across both lanes of the road. That was one step too far for the authorities, who, on Thursday, sent in workers – protected by police – to repair the damage.

Within hours, the confrontation degenerated. Masked youths hurled firebombs and rocks at riot police, who responded with rubber batons and repeated volleys of tear gas. A police helicopter circled overhead. "The town is out of control. Business activity has stopped," said Yannis Adamis, a resident and mechanical engineer. "The stores are closed. The sirens are blaring, the [church] bells are ringing, people are on the streets. This cannot continue."

In nearby streets, gaggles of teenage girls, cut lemons held to their noses to ward off tear gas, mingled with young men in balaclavas, stocking up on rocks to throw at police. An elderly man wielding a shepherd's staff stormed past. "We've learned at the age of 60 about Molotov cocktails," he thundered through his gas mask – an accessory sported by young and old alike. He would give only his first name, Panagiotis. By the end of the night, more than 20 people – including three riot policemen – had been treated in hospital. Just after midnight, a police officer's home was attacked with firebombs, leaving three cars destroyed. The officer and his wife, who is also in the police force, and their four children were home at the time but unharmed, police said.

Greece is no stranger to riots, and demonstrations in Athens often end in scuffles with police. But the escalation of violence in Keratea is causing concern. A sense of paranoia has settled over the town. Rumours abound that undercover police are at work, walking around town and gathering information. Journalists, with their cameras and notebooks, immediately arouse suspicion. A cameraman for an international news agency was beaten by locals during the clashes on Thursday, and his camera equipment destroyed.

A government spokesman, Giorgos Petalotis, condemned the violence, and said the government had no intention of abandoning its plans to build the landfill site, which it said would ease problems at Athens's single rubbish dump. "We are the only authority that has comprehensive plans for [greater Athens] regional development. We will not abandon the effort that has been made and is currently being made to build this new facility," he said.

But the residents are adamant. "There's no way we will back down. If they don't accept that this project cannot happen, we will be here as long as it takes," said Kostas Levantis, the town's mayor.