Disbelief and anger in the cradle of western democracy

With their economy in ruins and many thousands of their countrymen up in arms, Greeks are feeling an overwhelming sense of helplessness. John Lichfield reports from Athens

Number 23 Stadiou Street was once an elegant, cream-painted 19th-century villa close to the centre of Athens. It now stands, shabbily, on one of the many fault lines in the Greek capital.

If you walk south towards Syntagma (Constitution) Square and the Acropolis, you find broad pavements and the expensive shops of any big Western city. If you walk to the north, the pavements splinter crazily, as if there had recently been an earthquake.

You enter the Athenian, anarchist heartland. Walls are jumbled with spray-paint messages such as "cops, pigs, murderers" or the proud titles of a score of mutually-hating groups, such as the "Punk Alcohooligans" or the "Nihilism Team".

Number 23 Stadiou Street is now a branch of the Marfin Egnatia Bank. On Wednesday, persons unknown, believed to belong to an anarchist group (this being Greece, a thousand conspiracy theories thrive), threw a burning bottle of petrol through a downstairs window.

The fire brigade was slow to arrive through crowds of mostly peaceful demonstrators. The bank security doors locked automatically. Some bank officials, working through a supposedly general strike, escaped. Three junior employees, a man and two women, died.

Epaminondas Tsakalis, 36, was found lying in a stairwell. Angeliki Papathanasopoulou, 32, four months pregnant, was curled in a foetal position on an upper storey balcony. The body of a second young woman, Paraskevi Zoulia, 35, was recovered from inside the building.

The pavement outside the bank has since become a shrine and a noticeboard. Stadiou Street is now the place where Greece wrestles with its own conscience and its new-found status as a kind of sovereign Lehman Brothers: an overloaded, political and financial basket case which might tip the European, and world, economy back into recession.

Some mourners stare in blank disbelief at the charred windows. Others cross the police incident tape and kiss the stones of the building, as if it were a place of Orthodox religious pilgrimage. There are heaps of roses, lilies and chrysanthemums. There are a dozen small teddy bears for an unborn child who will never see one.

Theresa Theologou, 41, a supermarket checkout worker, placed a bundle of red geraniums on the pile. "I didn't know these people but they could have been me. I have a daughter, and the dead child could have been my child," she said in excellent English.

"I also work in the private sector. I also was ordered by my bosses to work through Wednesday's general strike. They didn't deserve to die for that. The crisis in Greece is not their fault. It is not Europe's fault. It's not the markets' fault. I will tell you whose fault it is. Our politicians are thieves. Our parliament, please excuse my bad word, is a whore-house."

Pyromaniacs are people who like to play with fire. Pyromaniac is a Greek word, just like crisis, tragedy, Europe, catastrophe and paranoia are Greek words.

Which, of many pyromaniacs, was most responsible for the horrible, futile deaths of Epaminondas, Angeliki and Paraskevi?

Was it the young, masked, pyromanic prigs who threw the Molotov cocktail which set light to the building? Was it the pyromanic markets who have been – in search of easy profits – goading Greece closer and closer to the flames of financial calamity in recent weeks?

Was it the European Union, which has, pyromanically, promised to send in the fire-fighters on half-a-dozen occasions but, until last Sunday, failed to supply water for their hoses? Greeks have learned, in recent weeks, to beware of northern Europeans, especially Germans, bearing gifts.

Or was it, as Theresa Theologou suggests, the fault of the pyromanic Greek ruling classes – abetted by many ordinary Greeks – who have been making the country's economy and dysfunctional political system into a funeral pyre for decades?

First and foremost, the fire was the fault of a small (very small) group of young, masked anarchists who bombarded riot police, overturned cars and hurled Molotov cocktails after a mostly peaceful, 70,000-strong demonstration broke up on Wednesday. They were drunk on self-righteous hatred of "the system", the Socialist-led Greek government, the European Union, the euro and, above all, "The Banks", as an emblem of capitalism and speculation.

The burning of the Marfin Egnatia Bank was, to the vast majority of Greeks, an aberration. Whatever the profound anger at the many-layered crisis enfolding the country, it is wrong to assume that further, serious violence is hanging in the dusty, Athenian air this spring.

The skirmishes between demonstrators and police after parliament passed a €30bn (£26bn) austerity package on Thursday night were reported by some foreign, financial commentators as "riots". Hardly. They were more like a foolish, ritual dance in which the police (quite unnecessarily) swept demonstrators from Constitution Square and the demonstrators burned a few dustbins and threw a few stones as they departed.

A few minutes earlier, I had been standing in the good-natured, rather directionless crowd, chatting to mostly middle-class protesters. The atmosphere was that of a cocktail party without cocktails (and certainly not Molotov cocktails).

The mood was summed up by Sissi Alonistiotou, editor of three weekly supplements of the respected, independent newspaper, Eleftherotypia (freedom of the press). Sissi said that she had come to the demonstration partly as a journalist, but mostly as a member of the public.

"I want to mark my disapproval of what the government is doing [in passing the austerity package]. At the same time, I realise that there is no other way. If these cuts and tax rises are defeated, Greece is finished.

"If you look at all these people, you will see they don't know what to do next. Like me, they feel they should protest but they have no alternative to offer. There is a kind of aimlessness."

The bank deaths have stunned a country, which was already close to a nervous breakdown. Many Greeks interviewed in the last couple of days suggested that the fatal fire might actually calm the situation, acting as a kind of catharsis, just like the deaths at the end of a classical Greek tragedy. It would have been worse, they said, far more inflammatory, if one of the anarchist demonstrators had been killed. That might have touched off the kind of revengeful, rolling riots seen in Athens in December 2008.

Other Greeks fear that that the nation's anger, and sense of helplessness, is now so great that further violence is inevitable.

Brady Kiesling, a former US diplomat and expert on Greek politics, now writing a book on political violence in Greece, said: "The bank deaths have bought the government a little time. How much time is open to question. The Communists here are of the unreconstructed kind that believe the revolution must come, They could decide that it's now time to edge things in that direction.

"They tell their people that there is another way than the EU bailouts. Well, yes, there is another way. It is called Rwanda."

On Thursday evening, the massed ranks of the Communists marched past the burned bank. They chanted: "Communism is the voice of the people. No, to the profits of capitalism."

At every intersection, young Communists formed into a disciplined phalanx to prevent the march from being disturbed. They carried small flags, attached to short staves as thick as baseball bats.

Why such thick flag poles? To defend themselves, they said. From the riot police? No from the hated anarchists. Orwellian Catalonia of the 1930s is still alive in Athens in 2010.

The pain of the €30bn second wave, compound, austerity plan forced on Greece last weekend is mostly notional at present. When a second round of pension cuts and VAT hikes begins to carve into the lives of ordinary Greeks, the Furies could be loosed upon the land.

George Kasimatis, President of the Greek chambers of commerce, supports the austerity package but bemoans the fact that the EU did not act earlier. "Two months ago the pain might have been less for Greece and for the whole world," he said. "Now we expect to lose 100,000 small businesses by the end of the year. I am not a politician. I do not wish to talk about the prospects for political violence but it cannot be excluded. And what we need most of all – especially for our biggest industry, tourism, is calm."

Two months ago, the mood in Greece was one of a dull, but resigned, acceptance that the game was up. Most people were ready to accept sacrifices, so long as the pain was spread evenly.

Whether pain can ever be spread evenly in a system so endemically corrupt and perverse as the Levantine political and economic system of Greece is open to question. How can anyone trust a system in which large sections of the wealthiest members of society – from ship-owners to lawyers and doctors – have traditionally, and quite legally, evaded almost all direct taxes?

One of the subsidiary tragedies of the last few weeks has been the humiliation – by the markets and by Greece's eurozone partners – of a decent and competent Greek Prime Minister, George Papandreou, and Finance minister, George Papaconstantinou.

A couple of months ago, many Greeks on both the Right and Left, were prepared to accept that Mr Papandreou was an honest man and Greece's last, best hope. He had started, albeit clumsily and slowly, to clear up the injustices and anomalies built into the Greek system. In return, most people were ready, despite union protests, to accept some immediate pain.

Now there is a sense of bewilderment and resentment that the self-fulfilling pressure of the markets has forced Greece into an even deeper hole than the one that it made for itself. And there is anger that other Euroland countries, and the Germans, in particular promised debt relief which never came or was too vaguely formulated to scare off the financial-market speculators. Mr Papandreou is now dismissed by many Greeks – not all – as just another bumbling, self-interested chieftain of a corrupt ruling class.

The problem is that correcting the injustices in the tax system will take years to harvest its fruit. The deeper, immediate, further austerity measures – VAT increases and pension and public spending cuts – imposed on Athens last weekend will produce an immediate cut in the state deficit. But they will fall mostly on modestly-off Greeks, in the private and state sectors, who do pay into the system and feel they have already made several blood sacrifices already.

Athanasia Theodorou, 39, is the doorwoman at the building opposite the burned bank. "We are at war in a time of peace," she said. "We're making [war] on ourselves and we are killing each other. And the worse thing is that those whose fault it is never pay. When man goes hungry, he rises up ... For this to be a new beginning for Greece, the government must also help and not push us further into the ground."

The Greek tragedy threatens to become a global tragedy. But was it all really necessary? There seems to have been an almost wilful, series of misapprehensions, beginning with the refusal of the EU – and mostly Germany – to grasp that there was a mood for real change in Greece two months ago. The refusal to back Greece strongly at that time now threatens the well-being of Germany and everyone else. The financial markets pushed the globe to the brink of catastrophe in 2008-9. The vast debts of the banks were, in effect, turned into state debt (Greek debt, British debt) to bail out the financial system. Now that same financial system is "shocked, shocked", to find that governments are heavily indebted and is trying to make money for itself by pushing the world towards catastrophe once again.

The Greek riot police, far from calming nerves, seem determined to sweep protest from the streets. The exaggerated accounts of "riots" that follow – fuelled by 24-hour TV and endless repeats of a few seconds of running crowds – further spook the markets (or rather further justify their speculation against sovereign debt).

He who the Gods wish to destroy he first makes mad.

All of us – and not just the Greeks – might consider the wisdom of one of the messages pasted on the charred bank at 23 Stadiou Street. The message was addressed to Epaminondas, Angeliki and Paraskevi, the three dead bank workers. It said: "We are all living in a constant state of hybris (culpable arrogance). May your sacrifice not be squandered."

With additional reporting by Menelaos Tzafalias