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On the shelf behind George Papaconstantinou's desk in the Greek finance ministry I noticed two books in English amid the heavy wedge of Greek language finance documents - Andrew Ross Sorkin's Too Big To Fail and Costas Kataras Nice Capitalism.

Well, Greece has had all it is going to have of "nice capitalism" for some time and the Greek finance minister is about to discover if his country is, like the book says, too big to fail.

For Mr Papaconstantinou, an urbane, young, Western-oriented technocrat, is the first finance minister in the developed world to have the gun of austerity pointed at his head by a coalition of credit rating agencies, derivatives traders, Ecofin, the German media and a pack of foreign press hacks who scarcely know what credit default swaps are, but are convinced they are signal Armageddon.

The key question is, assuming Monday night's European Union finance ministers meeting comes up with the offer of financial backing in return for greater austerity, can the Greeks bear it?

Can they stomach a level of austerity that no developed country has, until now, been asked to bear?

Farmers' blockade

Mr Papaconstantinou is denouncing the EU tonight for its lack of solidarity. We will see on Tuesday whether a deal can be done that maintains Greek social cohesion, but satisfies the readers of Bild and Spiegel with tough conditions.

Last week I travelled across Greece in an attempt to find out. Or I tried to.

Halfway between Athens and Thessalonika, on a long, straight and deserted motorway, I was stopped by 150 tractors lined neatly along the hard shoulder, together with some police tape and a small dog.

There was nobody around - no police, no traffic and even the owners of the tractors were not to be seen.

Then a man hailed me from the distance. Stumbling along with a sandwich and a cup of beer, he immediately fired at my translator a stream of invective that, she later confirmed, had libelled every public dignitary within 100 miles.

Thanks to my restaurant-level command of the Greek language I picked up one recurrent word - "octopus".

"It's the octopus," said the farmer, flexing his fingers like tentacles. "It's the mayor, the president, the factories, the euro; it's you, the British, the Americans. Take, take, take."

The farmers are in their third week of blockading all routes from northern Greece to the Balkans - 75% of trade has been stopped and fruit is rotting in its containers.

The problem is not, at first sight, Greek-specific. As in Britain their single farm payments have been lost inside a new IT system. The difference is that in Greece the government has no money to tide the farmers over until the subsidies arrive.

So the farmers have blocked the highway.

'Quietly dead' villages

"Does it make you popular with other Greeks?" I asked the farmers' spokesman, Sakis Karaiscos.

He smiled: "It makes us popular with our families and with our villages. I don't want to be popular with a camera, a newspaper."

The villages, he added, are "quietly dead" because of lack of income. When I asked why they have not been paid, he shook his head:

"We don't know and they don't know. The government. And the problem is that they don't know - don't know, or don't want to know."

It is a microcosm of the problems that afflicted Greece long before it became the test bed for EU crisis management and one that the current finance minister readily admits to:

"Greek people don't feel they are getting the services appropriate to a modern democracy," Mr Papaconstantinou told me. They have to pay under the table to get an operation, for example. They see graft going on unchecked.

It is, he accepts, a problem that goes beyond economics and to the heart of the issue of political trust.

In a country where not paying your taxes is, as my Greek barber says "a national sport" the low-income sections resent the shipping magnates and agri-bosses who they believe pay no tax.

There is a culture of tax evasion among professions even as noble as the law and medicine.

The political system is more or less totally patronage-based - you win, you sack your enemies and bring in your mates to work for you.

Mr Papaconstantinou did not stoop to the metaphor of the octopus, but he said: "The relationship between business and politics is not healthy." And he has brought in a bill to reform it.

Who will be hit?

So the Greek austerity crunch is going to be hard. The question is - who on?

So far the government has cut public sector wages by 10% and raised the pension age from 48 to 60. But this may not be enough.

Between 2006 and 2009 public sector wages rose 30%. Even last year the government hired more civil servants than retired.

There are obvious further measures that can be taken: a 1-2% rise in VAT looks on the cards. And Mr Papaconstantinou's tax evasion crackdown should raise 1.2bn euros.

But with the black economy accounting for 25% of GDP, economists at Kepler University, have calculated Greece could raise euros 15bn a year simply by collecting taxes properly.

The problem is, Greece's fiscal black hole is not yet properly measured. A Eurostat team has been in there since the new government revealed that instead of 3.7% of GDP the budget was 13%.

Now there are further teams of statisticians pouring in. If this crisis plays out to the same form as Enron and Lehman, they will most likely find an even bigger problem somewhere in the books.

But the problem is not measuring - it is collecting tax and ripping up the essential social contract between the middle class and the state. Basically, it involves spearing "the octopus".

On the dockside at Piraeus, Athens's seaport, the tower cranes and container transporters zip around - but not as fast as they used to. Trade has fallen back sharply as the economy contracted - minus 2.5% GDP last year.

I went there because, if anybody can stop the new austerity package it is the organised workers, and they do not come more organised than the stevedores at Piraeus.

As they sit around waiting to go on shift the men fill their canteen with smoke and the air with invective against their bosses.

On the wall is the communist party daily: headline "Workers Uprising!" On a nearby crane there is graffiti with the hammer and sickle of the KKE (which has 21 MPs) and some phrases inviting Cosco Pacific, the new Chinese owners of the port, among other things, to "go to hell".

The cargo terminal was privatised under the previous government. The holding company is registered in Bermuda and is a 50/50 JV between Cosco and private investors. They believe the new owners have been given "colonial style tax exemptions" and fear they will bring in new men on reduced conditions once a new terminal is built next door.

Stevedores' view

But on the day I met the stevedores, though the customs officials they work with were on strike, they were not. They have already staged a month-long strike already and gone back pending negotiations with the Pasok government.

"There was a social explosion before, in 2008, by the young people," said Giorgos Gogos, one of the dockers' leaders. "I would like a social explosion just to shake this building. But of course there is no point in things becoming chaotic. The problem is one third of Greek people can't pay their bills."

The dockers will strike on 24 February, with many others, but they still bemoan the lack of unity among the unions.

Here, as on the motorway with the farmers, there was a sense of resignation. And a feeling that - if not the workers it is more likely to be the unorganised youth who fight back.

Everyone in Greece remembers the "social explosion" of December 2008, after Athenian police killed a school student.

Resignation among students

I went to the university district, where the streets are plastered with leftist posters and drug dealers linger at dusk beneath a statue of former British foreign secretary George Canning.

I met activists from the youth group of another leftist opposition party, Synaspismós(Coalition of the Left). The party has 14 MPs and traces its roots to the Euro-communist tradition that was once influential within Labour in the Kinnock years.

But here too there was a mood of resignation. "Most young people I know are thinking about leaving Greece," said one. Youth unemployment is 27% and many graduates do casual work, juggling two or three jobs to take home 700 euros a month with no social insurance or benefits.

"Greek youth feel betrayed," said another, not just by the current government or the old, but by the political system.

He described the education system as "like yours 50 years ago" - beset by bureaucracy and tradition, susceptible to graft and - at the end of it - leaving you with a degree but no possibility of employment.

Instead of "the octopus" the students talked of global capitalism - they tend to see the main cause of the crisis as Wall Street banks and foreign powers, against which the local system of graft and mis-measurement is just a symptom.

There was talk here too of a social explosion from the youth - but it is not one the Synaspismós feels it can either summon or control.

All mainstream politicians I met in Greece said the same thing off the record - it's the youth, not the organised workforce, that will probably explode first if there are further austerity measures.

External threat

So what is the likely outcome? Barring some major financial crisis and the breakdown of the euro deal tomorrow, I think it is manageable.

The Pasok government is social democratic and has designed the austerity package to protect its voting base.

It points to the fact that 60-70% of Greeks for now accept, in opinion polls, that the austerity measures have to work.

Likewise the organised labour movement is not as strong as in Spain or Italy - indeed across southern Europe it has been weakened during the post-Maastricht years. And though youth riots can force reforms they have never brought down a European government.

However all this changes if a Greek government can suddenly point to an external financial "aggressor" - be it the IMF or the ECB or Ecofin.

In Greece there is no Fawlty Towers rule - the older generation "mentions the war" all the time: the German occupation; the British clash with the communist resistance; the civil war.

Any idea of Britain or Germany or the US telling Greeks that the austerity plan they have - for now - accepted is not enough; any attempt to redesign it to cut services rather than raise taxes and cut pay for example, may be the spark that causes a political and social crisis here.

If it happens then make no mistake - this is not some crisis on the periphery of the European social model. It will run to the heart of it because Greek people evolved a southern European version of the Euro-dream. Nice Capitalism, if you like.

They had a welfare state and a culture of rampant entrepreneurship; their city centres are now full of Gucci clothes shops and Swiss watch emporia and the SUV-per-head count, as in all newly enriched countries of Europe, is high.

They lived the dream in their own way, without bothering to pay taxes and in total contempt for the "octopus" and its political tentacles; pretty much in contempt of mainstream politics too.

They bunged money at the GP to jump the hospital queue, salted away money from cash jobs on the side, wheeled and dealt.

Pan-European complicity

And you know what? The rest of us loved it. North Europeans flocked there on our holidays; we paid cash in the restaurants and never asked for a receipt; we rode Greek mopeds, helmetless and in flip flop sandals.

We revelled in the nightlife where there are no measuring taps on the spirit bottles and where - as Damon Runyon once said of Las Vegas - "everyone has nice teeth and no last names".

Our finest statisticians - from cold, humourless Brussels no less - failed to spot the systematic mis-reporting of fiscal deficits.

Our dour, Protestant finance ministers sat side by side with successive Greek counterparts and raised no objections. How come? If Greece really does slide out of the euro, the searching questions will be asked in Brussels and Berlin as well as Athens.

Tonight may put the lid on the Greek fiscal crisis as a euro-problem. But tomorrow morning it will still be a Greek problem.

Anybody who's ever tried to catch an octopus knows how hard they are to spear - and even harder to finish off.

Watch Paul Mason's latest report on the Greek crisis

"We're the national version of Enron," says Liana Kanelli, a Greek communist MP, as we shelter under the portico of the parliament building from the rain. In the background tannoys blare out speeches and songs from the workers' demonstration that has surrounded the place. "They took our money, gambled it on the markets and now its gone."

"Can you stop the austerity plan?" I ask.

"You call it austerity, I call it war," she says. "And we refuse to be the collateral damage for the bomb dropped by Lehman Brothers."

For the Greek labour movement today was supposed to be day one of a campaign to stop the austerity measures imposed by the Pasok (social-democratic) government. The public sector strikes have been large: some ferries have been stopped, the airports are quiet and customs officers at the docks are absent.

But this is nowhere near, yet, a movement that could derail the Greek government's deficit reduction plan. As I've written before, some of the hyperventilating about this in the financial press has been misplaced. There is a serious chance of social unrest in Greece, but it depends how much further the government is forced down the route of attacking its own voting base.

I meet George Papaconstantinou, the Greek finance minister, in the economics ministry: for a while, his team have been unable to gain access to their own offices today but now, with the reception staffed only by security guards, and ringed by riot cops, they're busy with a string of interviews designed to bolster confidence.

The question of the day is: will Germany and maybe France step forward to guarantee Greece's future loans, allowing the cost of borrowing to fall and greater certainty that it will roll-over the debts in a couple of months time.

"I will evade the question," Mr Papaconstantinou warns me, before we begin, adding "tomorrow will be crucial". Right now, in Paris, the Greek PM, Mr Papandreou, is meeting President Sarkozy. At tomorrow's informal summit of EU leaders in Brussels, ringfencing the Greek crisis will be high on the agenda. Already the spreads on Greek debt - the geiger counter of instability - have fallen back in expectation of a deal.

Yesterday Greece announced new tax laws designed to recoup the equivalent of 2% GDP. The 40% tax bracket will begin at E60k, and there's the traditional promise to crack down on evasion.

But that leaves another 8% of GDP to find if the Greek deficit reduction plan is to work - and Mr Papaconstantinou believes he can do it without attacking essential services. Though painful, the 10% wage cuts, 12 year rise in the pension age and other measures, he says, can and will be borne by the people the trade unions represent. The markets have, for some two weeks now, begged to differ, and placed a massive $8bn bet on the Euro's collapse against other currencies.

Mr Papaconstantinou told me the EU countries needed "solidarity" against such speculative attacks. When I reminded him that no national government had ever been able to resist such attacks before, he said that there were fairly simple financial reforms that could be brought in, including "a ban on short selling". He rowed back from the idea of an outright ban on short selling the Euro, but said there were a number of options under discussion.

So what happens next?

There are several crucial stages to Greece avoiding a fiscal meltdown that could trigger a full-blown Euro-crisis. First, they will have to execute the measures they have announced. Though today's strikes were big, it's yet to be seen whether they will grow into a strike wave big enough to crack the parliamentary coalition Pasok has assembled around the cuts package. To me it looks unlikely.

Second, there is the question of transparency: the EU team currently going through the books, Mr Papaconstantinou insisted, would not find any new big nasties: the 13% budget deficit that emerged after Pasok took power was bad, and has given Greece a "credibility problem" he admitted, but they need to get over the hurdle of the Ecofin meeting next week, to ratify their plans and their published information.

Third, however, is what the markets see as over-optimism in the budget plans: there are no significant service cuts, there is rhetoric and some demonstrated intent to crack down on high earners, but this is not the austerity package Wall Street or London or Frankfurt would have designed. It includes fewer overt service cuts, for example, than Alistair Darling's current budget plans. Since Greece is the worst-case example among developed countries, many commentators believe the budget - even if executed - will simply fail to stem Greece's fiscal losses. Add to that they believe Pasok has over-estimated future growth.

I expect, in the next few days, possibly even tomorrow, a deal to be put together that does staunch the Euro crisis. Whoever it was that invented the acronym "PIGS" - for Portugal, Italy, Greece and Spain - was prescient, as over the past few days there has been the real possibility of contagion and a sovereign debt crisis across Southern Europe.

But then the EU leaders have to get their act together and defend their currency: further speculative attacks are inevitable given the structural weakness in the Eurozone arrangements this crisis has revealed.

For here's the paradox: If Germany sponsors a bailout that looks in any way soft on the structural problems that have got Greece into this mess, it will weaken the credibility of the Eurozone. The Maastricht Treaty rules - 3% deficits, 60% debt - will look like a dead letter.

Yet, having looked Mr Papaconstantinou in the eye it seems to me that Pasok's whole strategy is to achieve such a deal. They can just about implement an austerity programme that raises tax but does not slash services and infrastructure spend. But if the EU ends up sending plenipotentiaries in to demand much tougher cuts, then the cuts themselves - and the factor of outside interference - will enrage people like the public sector workers I met on the demo today, whose anti-Euro rhetoric was matched only by their dislike for Britain and the ³ÉÈË¿ìÊÖ.

The wildcard remains how the less organised, much more disparate urban youth will react to all this. The Greek government knows this too and is watching the streets, not the workplaces, for signs of discontent. Trade unions they understand - probably much better than those hedge fund traders who had staked money on some kind of union-led upheaval. The youth they have little traction with - and it's the young who will get hit strategically: their working lives will be 12 years longer than their parents' generation, their wages will be lower, the economy they live in will feel less vibrant, their access to the shambolic education system will be constrained.

And - as the youths wearing pig's head masks on the demo today were keen to point out - there are young people like them all across Southern Europe. Longer term it's a contagious youth unrest from Thessaloniki to Lisbon that Europe's leaders may have to watch out for: "The PIGS fight back," said the banners today.

Instead of a straight class divide this crisis has fuelled a more complicated generational one: older workers have been poor before and, some of them will privately admit, can survive being poor again. But for those in their early 20s to see all the aspirations fostered during the noughties cancelled indefinitely is a pretty hard pill to swallow.

Athens, 10pm: All economic crises eventually become political crises. But they don't all follow the same pattern. Even the most complex of economic crises can usually be summed up in a few graphs the shape of a V or U. But once the pressure works its way through into the visceral world of street demonstrations, scarred national pride, old wounds re-opened, no graph is going to encompass or predict it. Thus, as the UBS sage George Magnus puts it: "political economy is back." (UBS Research, The Return of Political Economy, 5 February 2010)

But the political economy of the Greek sovereign debt crisis involves all those concepts that the two-dimensional economics of the past 20 years finds it not only hard to cope with, but distasteful even to discuss: class, communism, Europe's fascist past. Oh, and whether the Euro is going to survive.

The economic crisis has raised a bonfire of the vanities. It floored countries like Iceland and Ireland, where the prosperity and property booms were found to be driven by a financial system that went quickly bust. But Greece is on a different level: it's not the banks that are bust but the country.

The incoming Pasok (Pan-hellenic socialist) government discovered that instead of 3%, or even the revised 6% of GDP, the budget deficit was running to 13%. Somebody had been mis-stating the figures; whole tranches of defence expenditure, for example, seem to have been covered up.

And while a 13% deficit - and a 110% national debt for that matter - are not a disaster for a developed country, they cannot really be sustained in a country where, as my Greek barber puts it, "not paying your taxes is a national sport".

On the streets here, people don't blame the current Pasok government, yet. Young, trendy leftists rail against "global capitalism"; the jaded old guys in the cafes talk about "the octopus" - the political system with a corrupt (they allege) tentacle in every corner of Greek society.

But it's not just successive Greek governments that look culpable. The European Union turned a blind eye to consistent rule breaking. It offered the protection of a single currency and a central bank, without requiring fiscal discipline. Now it is finding out you need more than this to make a currency strong - you need political will.

For just as with Wall Street - where regulators had no idea about the scale of dodgy dealing and little enthusiasm to find out - Brussels has tolerated Greek government rule-flouting, more or less systematically, for the best part of two decades.

Greece was bailed out by the EU in 1987 and reforms were promised, but not delivered. Having scraped into the Eurozone at the height of an economic upturn, Greece has never looked like it could stay within the rules without some massive reform programme that the political system is incapable of delivering.

If Greece were a "true sovereign", with its own currency, that currency would now be the subject of a massive tactical burn by hedge fund speculators, just as Britain's was in 1992. But it is part of the Eurozone. So only the insurance policies on its national debt can be the subject of wild speculation. An $8bn bet has been placed on the collapsing value of the Euro - and as one banker tells Newsnight tonight, it has further to fall.

As George Magnus points out, sovereign debt crises usually need four measures to resolve: devalue the currency, slash interest rates, monetise the debt - by the central bank buying up government debt - and a bailout. Of these only a bailout would be possible for Greece. The Eurozone makes the first two impossible and the third nearly so. So it's bailout or bust.

But here's the problem: the crisis has exposed the absence of any mechanism for the Eurozone or EU to bail Greece out, and the absence of any collective will among EU finance ministers to do so. After 20 years of failing to force Greece to stick to the EU and Eurozone rules this should not come as a surprise, but it has suddenly struck the markets how weak it makes the Eurozone itself look.

For if Greece were to default, suddenly its bonds could not be accepted by the ECB as collateral. That would cause contagion to other parts of the financial system, because for Greece read also maybe Spain and Portugal. Bankers use government bonds issued by these countries as collateral in deals and suddenly their collateral would be not looking very healthy. It would probably spark a full blown run the debt of all flaky Eurozone countries, in the form of rising real interest rates on government debt and credit default swap movements.

And it would do something else: it would blow apart the strategy of the EU for dealing with the crisis beyond the Eurozone. Latvia, for example, imposing massive austerity as a price for eventually getting into the Eurozone; Iceland, pushing its way up the queue to join the Eurozone; Bosnia, unofficially already using the Euro; Ukraine, with its distant hopes of EU membership; Turkey ditto. Forget all this for a long time.

Suddenly the idea of inviting crisis-wracked countries to join either the EU or the Eurozone would not look very clever, especially to the good burghers of mittel-Europa who had been told for two decades that the whole Euro project was going to place them at the epicentre of world stability and prosperity.

But. Newsflash. Greece to planet Earth. Here's the better-than-expected news...

There is, I surmise on the basis of being here 36 hours, zero chance of Greece being forced into default by a mass social movement opposed to the cuts.

It's still possible that the bond markets themselves could force Greece this way - but having spoken face-to-face with left wing student leaders and public sector worker activists, here's what they say:

Their timescale is two years, not two weeks. Even those who do not want this to happen accept that Pasok will basically channel and head-off the anger. I have spoken to a bin-man on 750 euros a month take home pay, facing a 10% pay cut, who says this, and is mad as hell about it, but still prepared to see the Pasok government as a shield against the global markets, not enemy number one.

I've just sat in a village café with local leaders from both Pasok and New Democracy who say they will support the government, painful though it is. But only so far. As one put it, if they force us into deep austerity, we may have to launch a revolution - though it may not be this generation that does it.

For these reasons it's what happens after any bailout that is crucial.

The country has unresolved political fault-lines going back to the Cold War. Among commentators it has become fashionable to affect ignorance of the differences between Eurocommunist and hardline post-Soviet doctrines, or to care about strikes, or to remember who did what to whom in that chaotic period at the end of World War II. Now these are highly relevant in Greece, a country where a minister can state openly that there are "fascist elements" within his own police force, and where the rival wings of post-Soviet leftism have between them 34 MPs, and hammer and sickle posters plaster some village streets.

The Pasok government of George Papandreou was put into power during the first wave of political reaction to the economic downturn, in 2009. The centre-right New Democracy party, which it now seems mis-stated Greece's financial difficulties, was thrown out in a swing to the left.

The Papandreou government privately briefs that it is the target of a right-wing ideological speculative attack by US and European hedge fund managers and that its deficit reduction plan is sound. The communist-led, trade union movement has rejected the plan as too austere but is currently restrained by the fact that the voting base of Pasok and the left is supportive of Mr Papandreou and does not want to create an opening for the return of the right.

But soon the markets - or an IMF-led bailout, or even a rule-shattering EU-led bailout - will demand tougher measures.

There is a massive public sector workforce here. Its wages have grown rapidly, and out of proportion to any other Eurozone country, 30% since 2006 compared to 10% for the Eurozone, according to figures produced by GFC economist Graham Turner.

These public sector workers will be the big losers in any austerity plan. Staring, plaintively, at a binman's wage slip bearing the grand total of 750 euros takehome, for a month, after 25 years service, brings it home to you. On the same payslip I counted about 400 euros worth of deductions - only 58 of which were actual tax. Direct tax rises will hit such people hard.

If an austerity plan is, eventually, imposed on Athens from outside, either from Washington or Brussels, then the Cold War history of Greece becomes highly relevant.

During WWII the German occupiers tried to run the Greek economy from Berlin. Then in December 1944 a different army opened fire on Communist-led demonstrators in Athens, many of whom had been part of the anti-fascist resistance. That was the British Army. Together with the US, and with the approval of the Kremlin, the Brits then disarmed the communists. A year later civil war ensued, between the communists and a monarchist-conservative government. It tore Greece apart.

If it were all just ancient history it would be irrelevant. But if you go into the kafeneions where there are still veterans of that time alive, much of the discussion still revolves around these events. Villages are divided left and right, along lines of a blood feud that is viscerally remembered. And on the farmers' roadblocks that are paralysing northern Greece, where I've been today, they are not ashamed to voice their belief that this is all a plot by the US and Britain to ruin the Greek economy. And for Berlin and Brussels they have contempt.

Right now the Greek political class has held together: all except the two left parties in parliament have declared support for the Papandreou austerity plan.

If a harder one is imposed from outside there will be mayhem - and Pasok will most likely (if it follows generations of political form) swing leftwards, leaning on its popular base and refusing to countenance further austerity. To anybody who followed the Argentine crisis of 2002 it's a recognisable pattern. But Argentina was not in the Eurozone. A default-defying swing to the left would immediately call into question the credibility of the Eurozone, whose rules - at Maastricht, long before the Euro itself was launched - were written to make such swings to the left impossible.

The old fault-lines could persist peacefully in Greece, essentially, because it has been a laid back, highly educated and middlingly prosperous country. If the Eurozone's architects turned a blind eye to this low-tax haven on their southern border it has been because in many ways it has lived the Euro dream: entrepreneurship plus a welfare state; high culture plus flowing football.

To keep the dream alive, it is highly likely that Greece is about to be bailed out, and that the current EU mission to "monitor" Greek economic figures is a precursor to that. But it's the shape of the bailout, the conditions and the social reaction that will prove crucial.

Right now, from where I'm sitting, the Greek crisis looks as follows - the Pasok government will hold, making press speculation about imminent default or social upheaval look overblown - and in the light of the huge bet placed on it in the markets, a little bit cui bono.

But as for the young generation, they will be queuing up to leave the country: they see the whole thing as the end of a dream: they have only low wages, 27% unemployment, minimal pension rights and a decade of meagre growth to look forward to.

It's the anger of the youth, not strikes like the one that will paralyse this city on Wednesday, that is the real unpredictable factor.