Mikis Theodorakis was blaring from the loudspeaker vans when we came into Syntagma Square this morning — some sad, but stirring song, presumably of struggle and noble defeat, no doubt. It was 10am, and the place had been filling up for an hour, as phalanxes of marchers had come from the surrounding streets, every second or third person with a flag for the KKE Communist Party, ΠΑ.ΜΕ, the All Workers Military Front, and other banners spouting gibberish.

Pro-printed, hand-painted, waving in the grey winter morning, the protesters appeared to be coming from every part of the city. They were students in keffiyeh, and shift workers in chain-store parkas, academic types, grey-haired with a scarf tossed across a leather jacket, and a few elegant young women in the Athens uniform of head-to-foot black, platinum blonde hair, and thigh-high boots that took about a crocodile each. It was the worker-student militant army one had fantasised about in the dark, distant ’80s.

“This is really disappointing,” said Yianni.

“Oh, what?”

“Yeah this is really small. It should be filling the square.”

It was true. Though this was the smaller of the two rallies on the day of Greece’s 24-hour public service strike, one could see his point. The larger rally, called by the distinctly centrist public service union, was up the road. But this one, organised by the Communists, who hold about 20 seats in parliament, should have been able to fill Athens’ centre square. But concrete was still visible. The pretzel sellers looked unhappy, even more so when a light rain began.

On the steps of the Grand Bretagne Hotel, overlooking the whole square, the businessmen taking a quick smoke moved inwards. Only the Somali umbrella sellers looked happy, a string of Burberry knockoffs on each arm, doing a brisk trade.

News reports would later make great play of a volley of tear-gas fired when a group of Athens garbos had attempted to join the march by driving their rubbish trucks through a police barrier — a measure of the coverage that dominates much of the news from Athens. But for the most part, this first response to the Papandreou government’s imposition of a series of austerity measures to deal with the country’s galloping fiscal crisis, was rated a disappointment.

Not a disaster — after all, the whole government, airport and (non-emergency) hospital system was shut down, the taxi drivers are coming out tomorrow, and a general strike is on the books for February 24. But with Papandreou’s specific program — almost provocatively announced on the eve of the strike — including freezes and cuts to public service salaries, a raising of the retirement age, and an attack on beloved benefits and perks, many have taken the muted response as a measure of silent, or begrudging consent to financial reform, a cause to which Papandreou has attached himself with total commitment.

The Athens public service strike played across the European and global media all day, and not because the world is concerned with the conditions of hospital porters in Thessaloniki. What might have been another tale of woe in the aftermath of the 2008 global financial crisis went to a whole new level a fortnight ago, when the Greek PM told the annual Davos conference that the country was the “weak link” in the Eurozone and the EU, and that the possibility that it might default on loan repayments in April, was real. The prospect of default has been around since November last year when the ratings agencies downgraded the country on the news that it was running a 12% budget deficit — a figure that may well be on the low side of estimates.

Since then, its interest rates have soared, thus pushing it to the brink. Default by Greece, Papandreou warned, would set off the whole of Southern Europe, with Spain and Portugal running serious (though not Grecian) deficits, and even Italy threatened. Greece was a problem far beyond the eastern tip of Europe, Papandreou warned — the eurozone and the whole project of European integration was at stake.

Indeed, as the people of Athens were massing in the squares, Papandreou was pushing the issue further, in Paris putting pressure on French President Nicolas Sarkozy and others to provide some form of backstop to his country. What that would be is up in the air — the EU is making up this sh-t as it goes along. The European Central Bank can’t directly bail out an EU member, so a nation-to-nation arrangement has to be made. That leaves the leaders of that country politically exposed, so the face-saving idea of Germany giving a “guarantee” on Greece’s loan repayments has been floated as the most likely solution. While avoiding the worst consequences for the euro, it makes the currency look distinctly soggy — for the euro it is, as one dealer noted, a “lose-lose” situation.

A lot of words have been devoted to analysing the motives for Papandreou’s brinkmanship over the past fortnight — was it an honest cry from the heart, or a canny move to pass his problem upwards? Whatever the case, it had the effect of gaining the world’s attention, chiefly through the currency markets, which sent the euro on a roller-coaster of short-term lifts and falls unknown in its decade-long history. If Papandreou’s claims about the twinned fates of Greece and the EU had not been true, they became so simply by saying they were.

Papandreou may care less about the long-term health of the EU project, than he does about the political difficulties of getting the country’s finances back on track. His Socialist Party government was elected two years ago with a whopping 10% swing from the centre-right New Democrats, who had gone to election two years early, hoping to take a loss with a slim margin and let PASOK do the hard job of reconstruction. Instead PASOK took 160 seats to the New Democrats’ 90, with the Communists and a left coalition taking holding 30, and a hard-right populist outfit having a dozen or so.

Papandreou knew that he was inheriting a basket case, but events conspired to give him more than he bargained for, the 2008 GFC providing the first major hiccup, stalling the economic growth on which the country was relying to get itself out of the fantastic debts created by the 2004 Olympics. Such debts were made worse by the fact of being concealed by dodgy accounting practices, an open secret from the time that Greece was admitted to the eurozone in the ’90s.

Countries in the euro are supposed to limit their deficits to 3% GDP. But few of the European developing economies do, and the EU turned a blind-eye to it from the start, in order to get the euro going in the first place. Greece really took the piss though, its deficit ballooning partly because its public sector is organised in so byzantine a fashion that it is difficult for the government to work out how many people it actually employs. The situation has been unsustainable for years, and the current crunch is a chance to reorganise.

At Syntagma Square, Yianni is having none of it.

“The bankers got us into this mess, why should the poor pay for it?”

It’s the official Communist line, their solution a series of taxes on the rich, and it is not without some accuracy. Since Greece entered the euro, the country has enjoyed years of augmented growth in the national economy, courtesy of investment inflow, and easier borrowing. But the benefits have been uneven, to say the least. The price of many basics went through the roof, while key export industries suffered from the abolition of the drachma.

Worst hit was tourism, many Greek holiday spots becoming uncompetitive at the same time as European cheap-flight carriers expanded their operations to Turkey, Morocco and other low-price destinations. Income inequality has soared — between and within classes, and between the city and the country — and more of the overall economy is taken up with consumption spending. Worse still, the EU “stabilisation” funding, which was designed to compensate for the loss of export earnings, chiefly by the agricultural sector, has encouraged stagnation in the sectors that most needed to adapt. Now there are no more stabilisation funds to come, so whole sectors are about to fall off a cliff.

All grist for a red wheel, but the Communists are having a hard time gaining traction in a struggle that, a decade ago, would have drawn out a residual proletarian solidarity lost in much of the rest of Europe. But one effect of eurisation has been to segment waged workers, between public — who enjoy benefits and conditions cemented in an earlier period, that of Papandreou’s father, who ran an old-school socialist government in the ’80s — and those exposed to an increasingly “precarious” private sector of shift work and short-term contracts. Greeks may have a thunderous government deficit, but they don’t have the northern European-style welfare system that would explain it — unemployment benefits, medical and housing services are all poor, and Athens teems with beggars, all of whom look alike, the men wild-eyed with beards and a halo of long hair around a bald pate, a legion of Diogenes in search of a barrel. The women are black widows, who crouch low in supplication, holding a paper cup aloft. It’s a formalised pose, but no less desperate for that.

Furthermore, vast amounts of public spending never reaches its target, consumed less by outright corruption than by duplication, intra-departmental conflict and sheer inertia. Athens is a measure of this, the neat Olympic-era shcmick of its central areas disappearing within a few blocks of key squares to reveal broken footpaths, potholed roads, and dead streets of decaying concrete. Whatever money was intended for their upgrade dried up long before it got anywhere near ground zero.

In Syntagma Square, as the crowd swells to its maximum, the music is turned off, and the speeches begin from the makeshift podium. A young man approaches, with a sheaf of paper, and begins a riff that, in style and approach, could be from any time in the past half-century. There’s no need for a translation to get the approach, language breaking through the mist of incomprehension — capitalismos, drastic, ultra, neo — by sheer repetition.

“He is explaining the roots of the crisis,” Yianni whispers to me eagerly, and somewhat redundantly.

Part of a youthful contingent waving red flags and marching in formation, his ardour is part of the problem the left faces — that they are losing ground to the Socialists among workers who would hitherto have supported them. That is partly due to the fact that the party’s solution — leave the euro, leave the EU, return to a publicly owned economy, flies in the face of the widespread perception that entry to Europe brought the country out of an economic stasis of the years between the end of the junta (1975) and the take-off of the early ’90s. Papandreou has succeeded in convincing a section of working people who would once have been militant, that — in a familiar phrase — there is no alternative to doing whatever it takes to stay integrated in Europe. Increasingly, as has occurred elsewhere, earlier, the Communists compete with the hard-right for the votes of a residual industrial working class.

Papandreou and PASOK are hoping that the process will go much as it has across Western Europe — a modernisation that sucks the heat out of politics, replacing it with consensus administration. That may be the case, but it is also possible that Papandreou’s remark about Greece as the “weak link” is more telling than he knows — that the last place in Europe with a living militant, solidarity tradition, when intersecting with a technocratic post-politics, may produce something else entirely. Looking at the bright streets surrounding Syntagma, with its global chain stores — Costa coffee, H & M, Marks and frikkin Spencers — you can see why so many people are keen to stay with the smooth euro-vision of the central parties. But those streets lead into other streets, where there is less in the windows, and loose tiles beneath the feet, and the red flags are still flying there.