"In two months' time all this will be brown," says the taxi driver, breaking the spell of the fresh, green landscape rolling past us.

"We have 43 degree heat here. This is Cyprus."

By July the island's fields will be a crisp yellow, the deserted buildings at the Green Line - which marks the ceasefire with the Turkish Army in 1974 - will crumble a bit more; the green almonds you can chew without peeling from the trees now will be hard and brown. All that is certain.

But everything else is uncertain.

Cyprus has been deemed small enough and unique enough to try out something new: a smash and grab raid on the savings of the rich, the deposits of companies, the accumulated funds of charities and churches.

To make a country's finances safe the savings of its people will be reduced - and made permanently risky.

The "haircut" process is quite brutal: the bank creates a new account for the Republic of Cyprus's treasury and transfers a portion of everybody else's account, over €100,000, into it.

One finger on the return key of a computer is the sum total of effort required.

As I write, there are small queues forming outside the banks in the streets of the capital, Nicosia.

People are grim-faced rather than angry. The anger, I expect, will come once they find out hard facts about where their money's gone, and that may not be possible for everybody today.

So far this has been the face of the Cyprus banking crisis: the resignation of a perennially laid-back people, on an island where networks, family and church exert a powerful counterbalance to the forces of financial panic.

But give it two months and it will look different.

As of today businesses will find out how much of their cash has gone; family dowries and pension pots will see their value slashed.

The cheque written two weeks ago by the boss of the biggest halloumi cheese factory will turn up in the accounts of the farm co-operative possibly 40% smaller than intended.

Businesses already stressed by weeks of low liquidity will be forced to the point of failure.

The International Institute of Finance - which designed the rescue plan - estimates the Cyprus economy will shrink by 10% for each of the next two years.

And this is a place that is by no means rich.

The roads are good but the flashy SUVs are driven by Russians, not Cypriot farmers.

The typical piece of farm machinery has two colours: the original paintjob and red rust.

Cyprus will be forced to endure a slump designed in Brussels and Frankfurt because it had made mistakes that were rubber stamped there too.

It let its banks grow to eight times GDP; those banks bought Greek sovereign debt as an act of solidarity and lost their shirts. It became an offshore finance haven.

Offshore finance is not a crime but a business model. Like it or not, it's an essential part of globalised capitalism: it's what allows rich people from heavily taxed countries avoid tax; it's the conduit for massive business deals, and massive trade.

Go down a side street and look for a certain door in Nicosia and there's the nameplate, still, of TNK-BP, the Anglo-Russian oil joint venture that has kept headline writers busy for the past few years.

That was no branch office: that was technically its HQ.

Two thirds of the German shipping industry is based here and 25% of all the EU's ships are registered here.

They pay no tax on profits, no tax on the sale of ships, the crews pay no income tax, there are no rules limiting the borrowing of shipping companies.

But now Germany is, like Captain Renault in Casablanca, "shocked, shocked" at the morality of offshore business.

Anyway, it's over.

Most of the smart money fled when the warning signs were flashing, and the rest will flee the country soon. With one bank - Laiki - bust, the European authorities have managed, and this is some achievement, to make the other big bank, Bank of Cyprus, more risky.

The Cyprus story now merges with the Greek and Portuguese story: austerity, falling wages and recession shrink the economy so that the debt sustainability projections of Bailout 1.0 fail, and lead to Bailout 2.0.

But the biggest hit of all in the past two weeks has been to confidence in the troika as a crisis-manager.

The troika consists of the IMF, the ECB in Frankfurt and the European Commission. It triggered the crisis two weeks ago by forcing the new Cyprus government to accept a draconian bailout, by withdrawing emergency liquidity assistance, which was keeping its banks alive.

Its original bailout proposal: 6% losses for all savers, 10% for those over €100,000, were knocked back.

But nobody will forget that the troika's first response was to over-ride the European deposit guarantee on savings under €100,000.

Nobody will forget that, in exceptional circumstances, an EU guarantee is as flammable as the EU flags that are getting burned on night-time demonstrations here.

The Dutch finance minister, Jeroen Dijsselbloem, triggered denials when he told Europeans this was the new shape of bank bailouts: losses for depositors before taxpayers; losses for bondholders.

But people in the markets did not need either the statement or the denial.

Blogger Pawel Morski, a London-based fund manager, put it like this.

He says: "There are two important problems here 1) depositors over €100,000 control enough money to overturn the European economy if they stampede; 2) there's - to a fairly fine level of precision - zero evidence that the people in charge know what they're doing."

Mr Morski points out, using official data, that across the EU something like 28% of all deposits (by value) are not covered by the €100,000 guarantee, and that the white knuckle crisis of last spring was caused by a fraction of that amount leaving the banking systems of Spain and Italy.

He further points out that, the aforementioned "shocked, shocked" burghers of northern Europe are running a banking system leveraged to three times GDP.

Dinos Constantinou, who manages a small Latvian bank in Cyprus, makes a similar point: "If the EU is saying, terrible Cyprus with its eight times leverage - why can't the USA, which has a banking system smaller than its GDP, say to Europe, you too must cut your sector in half?"

The upshot of all this is that, first, the troika is appears no longer to be acting as a unified and competent crisis manager: the IMF advocated something close to what has now happened; but the eurozone bankers and politicians were quite happy to renege on promises and hammer the little guy.

And let us remember it is not the IMF that was overseeing emergency lending to Laiki, effectively funding its management to destruction: it was those stern faced central bankers in Frankfurt.

And it was the European Banking Union that signed off both Laiki and Bank of Cyprus in the July 2011 stress tests (no-one who was at that press conference can forget the dismissive tone used to those of us who suggested the tests might be wrong).

There is, of course, a solution in sight: a true European banking union, accompanied by fiscal transfers that underpin an orderly resolution of the imbalances in the continent's banking system.

The main threat to this is as follows.

First, economics.

The IMF now admits it has consistently under-estimated the impact of austerity on growth. On Wednesday Spain tripled its estimate of the size of the recession it will go through in 2013, to minus 1.5%.

Of taxes collected in Spain last year, 30% will go to paying interest on its debt, up from 20% the year before.

The danger is Europe gets trapped in a two-speed debt deflation cycle, with the south as the vortex and the north at the perilous edge.

The second threat is more imminent, and it is political.

There is a growing fear, not just among tiny, powerless eurozone countries, that Germany is running the eurozone in its own national interest.

At every juncture where compromise, statecraft, guarded language and a care for outcomes rather than principles are called for, somebody German pops up - be it Merkel, Weidmann, Asmussen or Schauble - and points out "the rules" dictate otherwise.

It is easy to understand north European exasperation with central bankers who admit they have kept quiet about anomalies for political reasons, or with bankers who blatantly manipulate their holdings, or property guys who flee the country: they conform to cultural stereotypes.

But the eurozone will only survive if it can accommodate all the cultures of Europe.

Cyprus was never going to be systemic in terms of size. But if it demonstrates the authorities cannot handle a solvency crisis in a tiny country it will have lasting impact.

As for the psychological impact on savers it will not be clear until the next pulse-racing moment happens.

In every previous euro crisis, savers have behaved calmly. Even the Cypriots queuing outside the banks, right now, in the spring sun, are behaving calmly.

But, as with the countryside here, give it two months and things may look different.

First the facts.

Last Friday in Brussels the Germans led Eurogroup ambush of the new president of Cyprus, demanding an immediate resolution to the country's debt crisis.

They were the ones to demand depositors take losses, although at first Mrs Merkel assured them the ordinary savers would lose just 3% of their money. Then, according to a report in the Financial Times, Wolfgang Schauble, the German finance minister, upped this to 6% and 10% for those with savings above 100,000 euros - though this version of events is disputed by German CDU MP Dr Michael Fuchs, who told Newsnight on Monday it is "not our problem" how Cyprus raised the money - as long as it is raised.

This immediately nullified the explicit 100,000 deposit guarantee in the eurozone and the president of Cyprus said it would never pass through parliament.

So to focus Cypriot minds, Jorg Assmussen, the German socialist who heads the council of the European Central Bank also told them the ECB was pulling emergency funding to Laiki Bank, thus rendering it insolvent.

Now, after a week of Cypriot attempts to get Russia to soften the size of the bailout, which Germany also nixed, the Germans have rejected the latest plan out of Nicosia, which would involve nationalising the country's pension schemes and also mortgaging future revenues from an oil and gas field that comes on stream in 2020.

Germany's intent in all this is, at a textual level, clear: they want to avoid creating a moral hazard, rewarding a country that has sold itself as a rule-free playground for Russians who want to keep their money offshore.

They want to insist any money lent from the European Stability Mechanism (ESM) bailout fund can be paid back on a sustainable basis, and so they need a debt write off.

In Greece this came from banks who had bought government debt; but in Cyprus few global banks were stupid enough to buy this debt, and so the money has to come from Cypriots themselves.

But there is a wider, strategic and philosophical basis to Germany's stance. First, they are engaged in a tough negotiation over the shape of a future banking union in Europe.

Once that union is in place, say Germany, Finland and the Netherlands, direct centralised bailouts of banks will be allowed: there will be effective pooling of taxpayer money within the eurozone. But…

This north European trio are insisting the new banking union cannot cover "legacy debts": that is, from the pre-2007 crisis.

So it is logical to pursue at the same time a banking union with fiscal transfers in future, and a cleanup of the old debts with the countries responsible taking the pain.

On top of that the German public is increasingly outraged over the scale of its taxpayer exposure to what it sees as profligate peripheral countries.

So that is the principle, the strategy and the tactics of Germany.

But here is the problem: the outcome of their actions is repeatedly creating situations they do not want.

Cyprus, like Greece and Spain beforehand, creates an existential crisis for the euro. Once one country leaves, however small, the fiction that it is a permanent currency union is exposed.

In the process of imposing perfectly rational economic pain, something else is revealed.

The eurozone does not involve shared sovereignty - which is hard enough for some countries to accept under austerity pressures. In fact it has come to involve the sovereignty of the solvent nations over the insolvent nations.

What shocked everyone, not just Cypriots, was the sudden, tactical and coercive manner in which both the IMF and the ECB attacked the incoming Cyprus government.

It was the equivalent of the cops breaking down your door at 6am: perfectly legitimate if you have the legal right to do so, but it can seem excessive.

So Germany is left with a mismatch between intent and outcome. And the outcome could get really nasty. It is not just the contagion effect on southern Europe of seeing queues at cash machines and people going bust. Or the potential "me too" effect on Greece if Cyprus leaves.

What is being presented is a choice: stay in Europe or become part of the Brics, beholden to Russia for finance, Israel for various as yet untransparent deals, remain continually at odds with Turkey and Northern Cyprus, and once your finances have recovered, sell yourself as a kind of posh nightclub to the world.

Actually, the polls are telling us, and my colleagues on the ground report, more and more Greek Cypriots are seeing this as a viable option. Given the choice between a busted euro and a vibrant, if rule-free, future in the Russian penumbra, they may choose the latter.

This FT article gives a flavour of the diplomatic and military unknowns out of a closer Russian-Cypriot relationship.

The Russian Navy could gain a Mediterranean base, but Russian intelligence would then lose the ability to mingle freely with Nato personnel, suggests the author, so it is swings and roundabouts.

I would suggest the island is currently also something of a diplomatic and intelligence battleground for Israel and Iran, so it gets even murkier.

In the end the crisis has exposed two weaknesses of modern German politics: first on economics, they don't seem able to move away from principle-driven action to outcome-driven action.

On the bigger geo-diplomacy - driving an EU member state into the arms of the Russians and sending a big sub-textual signal to other states close to Russia - it just begins to look like the Germans cannot do geo-politics.

It is this graph of debt to GDP in the developed world after WWII.

After 1945 the developed countries managed to shrink a debt pile equivalent to 100% of GDP to just 20% by 1970. And they managed it while at the same time generating two decades of unprecedented growth - the era of Doris Day, chrome-laden automobiles and the mainframe computer.

The term for how they achieved this is "financial repression". It was revived in a 2011 National Bureau of Economic Research (NBER) working paper by economists Carmen Reinhart and Beren Sbranica.

I've written on this subject on my blog before.

Here's how the post-war world did financial repression: they corralled people's savings inside national pools of capital, they capped the amount of interest you could earn on savings, they made national capital markets illiquid - so moving your money around in general became hard, and then they unleashed high inflation for a short period, which then wiped out the value of the savings, and thus the debt.

As a result, the real interest rate for the advanced economies between 1945 and 1980 was minus 1.94. Reinhart and Sbranica call this an effective "tax" on financial assets.

Financial repression is not, however, a term you are going to hear politicians come out with. It sounds scary and it is, to some, justifiably scary. Yet we today, in the developed world, have a near 100% debt-to-GDP ratio, and that is without having fought a world war.

There are some who believe the world's leaders are embarked on a covert policy of financial repression - the magazine Money Week, for example.

This week I think we've seen two signal moments in the beginnings of overt financial repression - the European Central Bank (ECB) grab on Cypriot bank deposits, and George Osborne's changes to the Bank of England's remit.

Cyprus is a clear cut case. A 100,000 euros (£86,000; $130,000) deposit guarantee across the eurozone was flouted by "taxing" the deposits in banks that would otherwise go bust. It was an enforced write down of the value of savings and is accompanied by the most brutal capital controls possible - which is closing the banks and then re-opening them with a limit on withdrawals.

George Osborne's move today is designed to allow the Bank of England to play a bigger part in generating growth, due to the government's self-enforced inability to borrow more to spend on infrastructure etc.

He is effectively allowing the bank to "look through" the inflation figures, as they go above 2%, and to take unorthodox measures like buying company debt (aka lending to companies) even if it boosts inflation. This "looking through" I interpret as similar to the way the door security guy at a posh night club "looks through" you as you attempt to persuade him your are on the guest list. In plain English it means "ignore".

If, say, the Bank were to tolerate 4% inflation for several years, while the policy of quantitative easing (QE) held interest on savings at below 2%, the impact on savings would be eventually the same as the impact of the Cypriot government's grab. The personal finance industry has not been slow to point out that the remit change will hammer savers.

On top of that, there are other circumstances conducive to repression: the QE policy and new bank and insurance regulations, are forcing British pension funds to hold more government debt. Meanwhile the side-effect of QE is to heavily suppress market forces in the bond market: so that the government always has a buyer for its debt... which is effectively itself.

Now here's how Reinhart and Sbranica explain the modern version of financial repression:

"To deal with the current debt overhang, similar policies to those documented here may re-emerge in the guise of prudential regulation rather than under the politically incorrect label of financial repression. Moreover, the process where debts are being "placed" at below market interest rates in pension funds and other more captive domestic financial institutions is already under way in several countries in Europe.

Markets for government bonds are increasingly populated by nonmarket players, notably central banks of the United States, Europe and many of the largest emerging markets, calling into question what the information content of bond prices are relatively to their underlying risk profile. This decoupling between interest rates and risk is a common feature of financially repressed systems. With public and private external debts at record highs, many advanced economies are increasingly looking inward for public debt placements.

While to state that initial conditions on the extent of global integration are vastly different at the outset of Bretton Woods in 1946 and today is an understatement, the direction of regulatory changes have many common features. The incentives to reduce the debt overhang are more compelling today than about half a century ago."

Of course, the British government is not the only one pursuing a combined policy of QE, unstated currency devaluation, the suppression of market forces in the bond market and tacit toleration of high inflation. But it is a signal moment when an Anglo-Saxon economy, wedded to the ideology of inflation targeting for the past 20 years, suddenly begins to "look through" the inflation figures.

There is one missing piece of the jigsaw. To make financial repression work well, Reinhart and Sbranica point out you have to have a sharp inflation spike at the start, preferably into high single digits. This indeed was achieved in the late 1940s: "At the closure of the second great war, we witness a combination of very low nominal interest rates and inflationary spurts of varying degrees across the advanced economies."

Today there are inflationary pressures rising from population growth, competition for energy and natural resources, and from the rising middle class of the Bric countries (Brazil, Russia, India and China). But to spike inflation high, and sharply, would take some kind of crisis.

If some regional power could be induced to close the Straits of Hormuz for a few weeks, that would do it nicely.

"What actually is a bond?" asks Lucinda, chief executive of a designer chocolate startup, in Anders Lustgarten's controversial new play at the Royal Court.

It's a good question, and one the Royal Court Theatre is in the right place to answer, surrounded as it is in Chelsea, by numerous upmarket drinking joints full of people who look like they might have spent the day trading bonds.

Lustgarten's play - If You Don't Let Us Dream We Won't Let You Sleep - is Brechtian not just with a capital B, but a loud and guttural "ch" as well. By commissioning it, the theatre has thrown down something of a gauntlet to the newspaper reviewers, who didn't much like it.

In the play, a cabal of civil servants and city types comes up with a plan to securitise the welfare state: to issue "Unity Bonds" against the success of privately-run prisons, rape crisis centres, hospitals and the like. This "transfers the risk to the private sector" and it of course then fails.

Once he's created this dystopian premise Lustgarten pursues it through various hospital wards, rowdy football pubs, stabbings and police cells to draw a picture of society on the brink of breakdown. Ultimately this summons up an Occupy-style revolt, whose own confusions are explored in the second half of the play.

Audience reactions at the Royal Court have ranged from cheers so loud they've disturbed the other theatre based there, to a kind of grim faced awe on the night I saw it - which was possibly one of the nights when bond market people in the audience outnumbered Occupy people.

Ever since the financial crisis started I've been wondering at what point it would begin to have an impact on drama. We've had, early on, attempts to do on-the-fly reactions to the Lehman crisis - such as the short plays at the Soho Theatre, London we covered on Newsnight in 2009.

David Hare's The Power of Yes, Lucy Prebble's Enron, and even the National Theatre's reworking of Shakespeare's Timon of Athens all managed to cover-off what you might call the dysfunctional power-relations of the boardroom. And with Margin Call (2011), even Hollywood managed to capture the essence of what went wrong in the world of bespoke suits and Maseratis.

But Lustgarten's play is not about high finance. It's about financialisation - the power that modern, complex financial systems have begun to exert over our daily lives. For, as Lustgarten points out, many of his dystopian, futuristic scenes are based on reality in collapsing, peripheral Europe. He tells me:

"The most striking thing about the audience reception of this play is even its most fervent supporters don't realise it's all real. Everything in the play has either happened or is in the process of happening. The debt tax and the girl abandoned in the kindergarten happened in Greece. Unity Bonds, better known as social impact bonds, are being trialled in several places… This isn't dystopia; it's a news report from 2015."

Lustgarten's play draws heavily on one of last-year's buzz-books: David Graeber's "Debt: The First 5,000 Years". Whole chunks of Graeber's argument are there in the script: debt as a coercive power; the concept of odious debt, to be repudiated under international law; the inevitability of the "haircuts" countries like Cyprus are on the point of taking.

By the end of it, even the dumbest among us will understand something of the workings of debt and its derivatives.

Ultimately Lustgarten's scenario is far fetched: the deliciously named City guy - James Asset-Smith - starts "shorting" the bonds he's helped to design. That is, he takes a bet not on the success of the welfare state but its collapse. Though technically possible in any financial market, this is, Lustgarten admits, poetic licence.

But - and here is what gives the play a relevance beyond its immediate intent - what is shocking is that, by the end, we believe that it could happen.

Lustgarten is intentionally moving beyond a traditional left-wing critique of banking and finance. It's a kind of Brecht without the class struggle - and many of the disgruntled victims he portrays are the formerly prosperous. He says:

"Financial capitalism steals too from the middle classes, those who've always played the game - the tripled uni fees, the unpayable rents - without creating any obvious value, social or financial, in return. And you can't annoy and mug that many people, the backbone of bourgeois Britain, and get away with it for that long."

Watching the audience react to Lustgarten's in-your-face play, it becomes obvious that even the well-heeled types are prepared to believe society contains people like James Asset-Smith, people who despite the best of human intentions are driven by the logic of finance to do inhuman things.

And to use the language of self-deception.

When a disillusioned Lucinda confronts the civil servant who designed the scheme, pleading for government to stop it, she replies, to gasps of recognition in the audience:

"I'm no longer in government. An opportunity arose in the private sector, where I felt I could do more good."

When a hospital is forced to start turning people away at A&E, the administrator tells a patient:

"We can't make provision for you".

Like all dystopias, the power of this play is that it shows how mundane and casual a descent into the abyss might look, and with what familiar bureaucratic language.

This is what makes it a signal play for its time: because it is this massive distrust of finance, and of the political influence of high finance, that has become real, pervasive, almost second nature to many people now, in pub conversations - whether over a £12 bottle of wine or a £3 alcopop. Contempt for bankers and politicians, the belief that the latter would sell their souls to the former, is pervasive in popular culture and this play captures that spirit well.

One of the most disturbing scenes in the play is where three young men, fuelled by alcopops in a pub, mount a racist attack. Says one:

"Go up London. Africans in big headdresses swanning out of Harrods. Chinks in ****ing suits and ties, stuffing their faces in posh restaurants. Arab ****s ….Everyone's got a piece of the pie except for us and I am sick and ****ing tired of it. Nobody in this world gives a flying **** about you apart from the people round this table."

In this one scene Lustgarten demonstrates an ear for what's happening in parts of Britain, and how the relentlessness of economic crisis - even if it is no longer sharp or deep - eats away at people's hope, patience and decency.

I've tried to understand the way the economic crisis has worked its way through the theatre, movies and the visual arts. The significance of "If You Don't Let Us Dream…" is that it's the first high-impact play about the crisis, staged at a major theatre, where the action has moved decisively from men in suits to men in trackpants.

It was hard to forget Mohamed Lamhoud. I met him in a shattered factory in Patras, Greece, squatting there alongside hundreds of other young, male migrants. Their clothes were filthy; many had wounds consistent with being beaten up, or fleeing being beaten up. They were drinking and washing from a standpipe.

Mohamed was different in one way only: in his pocket he had a book by Jean Paul Sartre. And while I tried to engage him about the conditions in the squatted factory, he tried to engage me in a discussion about Nietzsche.

That was in February 2012. The 26-year-old Moroccan had been living there for months. As I left that factory, I never thought I would see any of the men living there again.

But three weeks ago, on Facebook, somebody friended me and immediately sent me a pop-up message: "C'est moi, Mohamed, sociologique." Through Facebook and Franglais he was speaking to me from inside a migrant detention centre in Corinth. And he had big news. He would soon be released.

When I met Mohamed again, at the gates of the Patras factory, he looked better. He had lost a stone in detention, but was putting it back on. He had newer clothes. And another book by Sartre: "Les Mots". In the year since I last met him a lot had happened.

"When you came and filmed us," he says, "there were maybe 400 to 500 people living in the abandoned factory. We slept in the sewers - because the police came for us every day. There were rats and mice in the sewers. It was toxic."

But life for the men in the squatted factory was soon to change.

Two months after I filmed there, the factory was attacked by supporters of the far-right party Golden Dawn. The trigger was the murder of a local man by three Afghans. Large numbers of far right protesters surrounded the migrant squat and attempted to invade it. Bitter clashes with the riot police ensued.

"They hit, they stole things. We thought if they found an immigrant they would kill him, because they are fascists. They came in with a load of people and the police had to stop them from entering in the factory. Because we are immigrants, we are nothing. What are you going to do if 20 people come for one person?"

I asked him whether the migrants understood why so many Greeks had become enraged by their presence:

"My friends were afraid. They do not agree with racism. But immigrants do not understand at this level what is happening. An immigrant has in his mind only to leave. He is not interested in what Golden Dawn is and all the rest. He is only interested in leaving this country. He doesn't care about anything."

Facing the rapid growth of the far right, in August 2012 the new coalition government launched a crackdown on the largely young, male, migrants who roam the streets in Greek cities. Operation Xenios Zeus (Hospitable God) saw police making a concerted sweep of the streets for those without papers.

I had seen it first hand before. I'd filmed a plainclothes police operation in October, to round up tens of migrants in the Agias Pandelemonos area of Athens, but was told to stop once the police saw our camera.

This month, in trying to retrace Mr Lamhoud's steps, I gained official access to a police raid under Xenios Zeus, in the Omonia district of Athens.

A team of three policemen strode out; all uniformed, and one with a lively and aggressive dog. As the dog, in a steel muzzle, manically tried to attack various random bystanders the other two began stopping pedestrians and checking their papers. Although I never got to ask them what their stop criteria was, it looked to me like the criteria was that they looked foreign.

After three stops, the team found a man who has the "Pink Card" - a certificate that he is in the process of claiming asylum. But it was a photocopy. He was detained on the street and after about 10 minutes put into a police car. If he cannot prove he has made an asylum claim, he would be sent to a detention centre.

In the past six months this has happened to 77,000 people, of which 4,000 have been sent to detention centres. And that is what happened to Mohamed Lamhoud. The police raided his shared house in October 2012: "They took me at 5am. You sleep and they come in. Twenty to 30 policemen. With so many police you become afraid. I have never seen in my life 30 policemen together. Three or five immigrants; 30 policemen."

"They take you away, but not for justice. They take you to the police station. At the courtroom, they just arrange your file. And they transport you directly to the camp. There is no justice. You go directly to the camp."

"There was no hearing?" I ask him.

"No justice," he replies. "I did not understand anything. From the police to camp. Why?"

They took him to the detention centre in Corinth, an old army camp, one of six opened to cope with the mass detention programme.

Mr Lamhoud's account of conditions there tallies with those of international observers:

"The conditions were very bad, unfortunately. The meals were not good, there were not enough blankets, for showers there was only cold water, freezing. We went on hunger strike to ask for hot water, just to be able to take a shower. I stayed two months without taking a shower.

"They played with our state of mind in order to make us leave. I don't know. They played with our state of mind."

On 18 November 2012 the hunger strike turned violent. Twenty four migrants were arrested after police tear-gassed the cells, and some men torched their bedding. At least three migrants were injured:

"It was a hunger strike. It's hard to make a strike when there are Moroccans, Algerians, Afghans, Pakistanis - and some of them are police informers. But we went on strike. It ended because they hit us. They didn't let us continue."

Newsnight asked to film inside the Corinth camp. The government pointed out that no journalists have ever been allowed to film inside. We filmed the perimeter instead, starting with the "Filming Not Allowed" sign, and stopping when police on motorbikes began to comb the area looking for us.

Migrants in the camps are not given access to the resources that would actually allow them to claim asylum.

But Mr Lamhoud is a survivor. By calling on the network of NGO workers he had helped as an interpreter in the squatted factory, he was able to get a volunteer lawyer to go into the camp and lodge an asylum claim. After three months they let him go. He now has the status of asylum seeker though it could be years before his claim is ever processed.

Last week, back in Patras and guided by Mohamed, it became quickly clear that - although technically cleared and secured - the factory was still inhabited, though by different people: Nepalese; Syrians; Sudanese from Darfur, plus a smattering of Algerians.

I meet a man who claims he is from Brazil, and has been caught up in gang warfare, which he demonstrates to me by miming a machine gun firing. He speaks Portuguese well, but also Arabic, because as my translator ascertains he is really Algerian by birth. Where is he headed? I ask:

"Glasgow."

"Why?"

"A better life."

"Celtic or Rangers?" I ask.

"Chelsea." He replies.

We go up a concrete stairway, without rails, into a bare concrete shell of a building. It looks like one of the battle-sets in Modern Warfare: shattered walls, blood-stained sleeping bags; the detritus of life on the road.

Inside are guys who have seen modern warfare for real. One man tells me he is from Aleppo in Syria. He and his friend are markedly wearing remnants of better clothing than the others, albeit faded and shredded by eight months on the road.

They have paid 3,000 euros to get this far. Two hundred metres away, through a hole in the shattered wall, is the Patras ferry port. The men whisper, in a kind of awe, the exact departure times, the ports of call - Brindisi, Venice - the transit times, the names of the ships. They know it all off by heart.

They want out of Greece, whose police raid them, forcing them into the sewers and culverts. Where are they going?

"Any country that respects human rights," says one. "There are no rights here," says the other.

Mohamed Lamhoud himself has a unique story. He tells me he cannot live in Morocco because he is "not a Muslim". He wants to live a secular lifestyle; to read the books and go out with the people he wants.

"It's very complicated," he says.

The more time I spend with him, the more I realise why he is guarded about the complications.

Some of the men squatting the factory with him last February were Islamists; the Syrian guys squatting now, with the remains of trendy hairstyles and with shaven chins, were most definitely not Islamists.

Once you are thrown into this deep uncertainty and squalor, the fraternity of the road takes over. The full details of Mr Lamhoud's case are for the Greek asylum system to deal with, not me.

He tells me how he got here. It is simple and deadly. Four-and-a-half-hour flight from Casablanca to Istanbul. Twelve mile walk to a certain hostel. From there four attempts by the traffickers to get him across the Evros river, in a boat, to northern Greece.

Long before my translator - who is switching form Greek to Arabic to French - gets it right, Mr Lamhoud's hand movements signal what happened. He mimes swimming: the boat capsized. Three Afghans in the boat with him drowned.

"The Afghans couldn't swim," he comments pensively. I have no way of checking this story, nor that of the thousands of others who have made that crossing.

He tells me the average fee paid to a people-smuggler is 3,000 euros to travel through Greece: "Of course, they are criminals," he adds.

Once in Greece, Mr Lamhoud faced the same basic problem that has afflicted all the men pooled into the side streets of Athens - it is almost impossible to claim asylum.

There is only one police station geared up to take the claims in Athens, in a squalid industrial wasteland, called Petrou Ralli. And that station takes just 20 people a week, on a Friday night, from a queue of about 200. It has been the subject of a scathing report by NGOs.

When we tried to film there, our camera crew was surrounded by 20 policemen and prevented from filming. A call to the police PR department put that right, but they still refused to conduct the selection procedure while we were there.

In Patras, the ferry port where Mr Lamhoud ended up, it is worse.

"The Red Cross is the gateway for making an asylum claim," says Katia Zagoritou, of the Movement for the Defence of Refugees' and Migrants' Rights, who first introduced me to Mr Lamhoud a year ago. "But the Red Cross only gets one appointment per week with the police. So functionally it's impossible to claim asylum in Patras."

After my first rendezvous with Mr Lamhoud we had arranged to meet again. He turned up late: "I was arrested and held - they said my clothes were too new and that I was on the streets too late," he told me. Because he did not want to attract the police to the place he shares with other migrants, "I slept under a bridge".

The Greek asylum system has come in for so much stick that, this year, finally it is set to be revamped. In 2011 Greece lost a European Court case, and was found to be in breach of the Convention on Human Rights, over the conditions under which detainees are being held. Now there is to be a new asylum system, separate from the police, and run by former UNHCR lawyer, Maria Stavropoulou.

It is to Ms Stavropoulou that the government directs me, rejecting requests for an interview with the police chief or the minister for citizen protection.

I put it to her that the Greek asylum system does not work. She answers frankly: "The asylum system in Greece hasn't worked for many years, for a number of different reasons."

In 2011 the Greek government was found in breach of the European Convention on Human Rights over its treatment of migrants in detention. I put it to her that two years on, having 200 people lying on the ground in the freezing cold to get just 20 appointments a week could not be fulfilling their human rights.

She accepted that "difficult access to the asylum system in Greece is one of the problems which the new asylum service is supposed to address. We are gearing up - we expect to have upwards of 250 new staff members". She said people in Mr Lamhoud's position were taking great risks, and that the "pink card" - giving the right to remain pending the processing of a claim - offered no long-term security.

When I put it to her that the creation of a harsh regime for asylum seekers had not stopped the flow, she answered, "this is why things are changing".

Mr Lamhoud's life, these past 12 months has been eventful. He has been on the receiving end of a mass racist attack; caught in a police detention sweep; incarcerated; taken part in a hunger strike; been lifted off the streets and, against massive odds, managed to lodge an asylum claim.

Despite this, he remains committed to the ideal symbolised by the well-thumbed paperback in his pocket.

"They want Europe. It is a hope, an objective. For some, Europe is paradise - you have to reach it," he says. Nothing the Greek state, or the European Union can do will stop the migrants coming.

His goal is to teach sociology in a French university. That seems a long way from sleeping under a bridge, and I get a sense that the Sartre book is a kind of talisman: a pledge to himself that it will happen.

He is spurred on by the knowledge that two of the men we interviewed with him in the factory, just 12 months ago, have already made it to northern Europe.

But the world around men like Mr Lamhoud is changing: there's a fence along the river Evros now. Soon the Greek asylum system will begin to process applications - which means deportations as well as approvals. And with the rise of the far right, civil society itself is more hostile.

In the abandoned farm, where he sleeps on the concrete floor with four others, I put all these difficulties to him. He says:

"It's like taking an exam. You revise and revise, and then you get to the final day, why would you give up then?"

Watch Paul Mason's full report from Greece on Newsnight on Tuesday 19 February 2013 at 10.30pm on BBC Two, then afterwards on the BBC iPlayer and Newsnight website.

The far right on the march, tube strikes have paralysed the capital. Now there is growing political violence.

The police have moved to clear out anarchist squats. Political party offices have been firebombed.

Last month, someone fired a Kalashnikov at the HQ of the ruling party, New Democracy.

Now the opposition leader Alexis Tsipras has upped the ante, accusing Prime Minister Antonis Samaras's government of pursuing a "strategy of tension", akin to that allegedly pursued by the Italian secret service in the 1970s.

Speaking to a packed audience at an Athens theatre on Monday, he said:

"In 1969, a bomb in Piazza Fontanta in Milan left 17 dead.

"This was the dawn of a long period where far right and fascist groups, in total collaboration with the Italian secret services, the parallel state, and the state within a state, developed what came to be called 'the strategy of tension'.

"Today the manuals of European extreme right have become the gospels of present Greek government."

So far the coalition government - which includes conservatives, social democrats and a small ex-communist party - has managed to stabilise the fiscal crisis, winning key concessions from the IMF and EU.

But if - amid political tension - the coalition were to fall, Mr Tsipras would be in with a serious chance of becoming Europe's first far-left prime minister of the post-Cold War era.

I met him in his offices in the Greek parliament on Tuesday. I asked him: "Are you seriously saying the Greek state is pursuing a secret strategy of creating violent tension?"

"It's not exactly a secret strategy," he says. "I think that it's now obvious that this government is the most right-wing and the most extreme government this country has ever had since the political changeover after 1974.

"It's obvious that the prime minster, Mr Samaras, is trying to establish an agenda which intensifies political conflict and aims at creating a sense of fear within the Greek society, in order to achieve two separate goals: firstly, to get people not to think of the economy, to scare them and have them thinking primarily of their own safety - about the dangers related to the immigrants or demonstrations.

"And secondly, to try and bring together the most conservative parts of our society, in order to establish a stable basis for his own political sway.

"But this strategy, I believe, is a very dangerous one for democracy itself."

The "strategy of tension" refers to the dark days of European politics in the Cold War.

After the Piazza Fontana bombing, an anarchist being questioned died in custody. Numerous trials - of leftists and far-right activists - in the ensuing decades, failed to establish a perpetrator.

The allegation at the time, as far-left and far-right terrorism took off in Italy, was that the violence was being fomented by the "secret state", to justify curtailing democracy.

So for Mr Tsipras to use this phrase in the Greek context is, to put it mildly, cranking up the political stakes - because there is real political tension in Greece.

This month, four anarchists were caught trying to rob a bank. The police Photoshopped their arrest mug-shots because the injuries they received made them barely recognisable.

The injuries were allegedly received while in police custody. Meanwhile, police have recently made arrests of people allegedly connected to a terror group called Conspiracy of the Cells of Fire and found arms caches.

Amid this, the challenge for Mr Tsipras's party, Syriza, is what would you do if you gained power? About Golden Dawn? About anarchist bank robbers?

An already hostile Greek media is asking if Syriza is a party that could ever run the Greek state.

"We will implement the law," Mr Tsipras tells me. "We will rigidly follow the letter of the law. And we shall have zero tolerance towards Golden Dawn, which is a gang, violating the law.

"We shall also uproot all Golden Dawn cells located within the [police and civil service]. We will not tolerate illegal behaviour from anyone or any group.

"And all those groups using violence, claiming that they belong to the anarchist field - a fact I personally do not believe in, because I believe that the use of violence is the most authoritarian act one can exercise - those groups too, will be facing the legal repercussions."

Public support for Syriza, and Mr Tsipras, dipped when the opposition party publicly backed a tube strike that paralysed Athens.

Though they scored 27% in the elections, and nearly won, their opponents see Mr Tsipras's complaints about democracy as crying wolf.

Thanos Veremis, Hellenic Foundation for European and Foreign Policy, told me:

"The paradox here is that Mr Tsipras is crying wolf.

"His party is going down in the polls and that has caused some panic among the party cadres.

"It's a fact that recently the government is taking advantage of throwing Tsipras's own statements back at him, in order to convince the undecided voters. Mostly because the undecided voters are not radicals - the radicals are where they want to be, whether of the left or right."

I ask Mr Tsipras whether the Syriza should now admit that the coalition has stabilised the fiscal situation, and that Syriza's proposed policy - of a selective moratorium or default - would have just crashed the Greek economy?

"No serious person could admit something like this. Look at the data," he replies.

"In Greece, in the last three years, in order to reduce the Primary Deficit of the government by 25bn euros ($33bn, £21bn), we reduced the internal demand by 70bn euros - that is the Greek economy shrunk by 70bn euros.

"It's like having seen a snake in a tree and deciding to burn the entire forest, to get rid of the snake."

Mr Tsipras has been on the offensive since the IMF admitted it had miscalculated - ie underestimated - the negative impact of spending cuts and tax rises on the Eurozone economy. He is scathing about this controversy about the so-called "multiplier effect":

"They admit that they failed to calculate correctly the multiplier. But, please, allow me to say that if this kind of mistake was to be revealed in any company, and if the people who made the mistake came forth and admitted it, the company would have at least reimbursed the client and would have fired the employees who made the mistake.

"Here we have the following sadistic absurdity: the IMF admitting that they have made a mistake, but continuing with the plan, without even an apology."

"And what's even more absurd, it's that the client does not protest! The Greek government is saying 'no problem, you made a mistake and we continue with this mistake'."

Mr Tsipras has been feted in Rio, Buenos Aires, and even the think-tank circuit in Washington recently.

But his own supporters are restive. There is a growing minority within Syriza which supports leaving the euro.

And the rank and file see the growth of the far right and fear that, while the far right are expressing raw anger, Mr Tsipras and the party's new MPs, look more and more like mainstream politicians - who on the Greek streets are despised.

I ask him: "Who are you? Are you the man of the parliamentary opposition or are you the man who is going to lead the strikers out here into a mass uprising against this government?"

"I think that this is exactly our biggest advantage. We can be at the same time the parliamentary opposition and tomorrow the government. At the same time we can be down in the streets, fighting and mobilising the masses.

"This is probably what they cannot accept, the political, the economic and the media authorities in Greece. Because in Greece we are governed by an oligarchy. It's the oligarchy of the media and of the plutocrats.

"So, we do have this advantage. We can participate in a protest, motivating people to defend their rights, while at the same time, we can be in Washington discussing with the IMF, the State Department or in Germany, conversing with Schauble, in order to voice the fair demands of the Greek people.

"We have one and a half million people unemployed, one and a half million people with a monthly wage lower than 600 euros.

"And the main question for me and for all of us involved in politics is how will all those people survive? How will these people live?

"And in order for those people to live, they need to defeat the fear and claim their rights. That's why I am here. I'm here to help those people claim what's theirs."

On the night Syriza lost the election I was in the party's cramped HQ.

One of the party's activists told me: "We lost, that's great for us." The assumption was that, as the economic crisis deepened, it would be Syriza next in power.

But the governing parties, through their PR teams, are relentlessly forcing the issue with Mr Tsipras: parliament or the streets? Syriza activists privately admit the party is reeling under the pressure.

But Mr Tsipras knows that - even if the country's finances are stabilized - with relentless austerity the governing parties are acutely vulnerable to issues raised by the past.

"If our government and Mr Samaras believe that he can run this country for ever, using blackmail, terrorism and the tension strategy he is sadly mistaken. Because the Greek people have a long tradition of democracy and struggle."

By raising the half-forgotten events of Italy in the early 1970s, Mr Tsipras is reminding Greeks of never-forgotten events: the anti-Nazi Resistance during World War II, the Civil War, the military junta in the 1960s and its overthrow in 1974.

It is another throw of the dice in Greece, a country whose crisis is nowhere near over.

Unnoticed, for the most part, by post-pub revellers and shoppers, Abe himself towers above the scene in Lincoln Square, hatless, tousled hair flying and brow furrowed.

He is there because he wrote a letter to the people of Manchester. Well not the whole people.

One hundred and fifty years ago the people of Manchester were divided, over the same issues that had divided America: cotton, slavery and freedom.

By the time the American Civil War started, in 1861, Lancashire was the "workshop of the world". Its 440,000 cotton workers, spinning and weaving in 2,400 factories, were as vital to the world economy as the Chinese region of Guangdong is today.

They had had a turbulent past: slaughtered at the mass demonstration of Peterloo in 1819, on general strike as recently as 1842, seized with Chartist discontent in the revolutionary year of 1848.

But they were calming down.

Cotton trade unions had emerged for which socialism - as the old firebrands lamented - had become merely a "bread and butter" issue, not a utopia. Wages had risen, calm had settled in.

But now, with the conflict in America, disaster struck.

Lancashire's main source of cotton was the Confederate states: 1.1bn lb a year were being shipped into Liverpool, up various canals and railways, to be processed in the small coal and cotton towns of the region.

When the Union side imposed a naval blockade on the South, the main source of cotton dried up. Some factories were able to switch to lower grade cotton from Egypt or Asia, but many closed: the classic financial squeeze took place on businesses already leveraged to the hilt to take advantage of a boom.

Mills closed and were mothballed. Workers - despite enthusiastic charity efforts mobilised by local bigwigs - went without food and heating, or were evicted.

By the autumn of 1862-1863, just as in the United States Lincoln was issuing the Emancipation Proclamation, turning the American conflict into a full-blown fight with slavery, the town of Stalybridge had just five out of 39 cotton mills working, 7,000 unemployed and 750 empty houses.

When the charities ran out of money, and tried to pay people with food stamps the usual Lancashire response ensued: led by "women and girls" Stalybridge revolted.

"… The old performance was repeated. Provision shops entered, stones thrown and a great crowd collected," wrote the Special Correspondent of the Daily News. "People have nothing to do; everybody goes to see. Many watchers make a mob. And the spirit of mischief - especially where there is an Irish element of population - shoots through the crowd like an electric spark." (Thus proving that urban riots and the way they are reported in the press does not change much over 150 years)

The Hussars were called in, bayonets were fixed and order was restored.

Politically, Lancashire was already split. The shipping and finance bosses in Liverpool had openly sided with the Confederacy, and organised both warships for the South and blockade running merchant ships out of Merseyside.

Now clamour began among the mill owners for the British government to deploy the Royal Navy to break the Union blockade - effectively putting Britain on the side of the slave-owners' revolt.

This alliance of ship and mill owners was not shy about mobilising meetings in favour of British military intervention.

The cotton workers' response was to organise a campaign of public meetings in support of both the blockade and the Union.

I can attest - because I am descended from them and have heard the folklore - that Lancashire cotton workers in the mid-19th Century were acutely aware, every day, that the last hands to touch the cotton before them had been black hands and unfree.

Their support for the Union was not some abstract principle, but an expression of human sympathy with millions of black Americans that defies the historical stereotype of 19th Century workers as an uneducated mob.

A speech by the liberal MP John Bright serves as a nice compare-and-contrast to today's standards of parliamentary language: "Privilege has shuddered at what might happen to old Europe if [America's] grand experiment should succeed," he told a mass meeting of trade unionists.

"I have faith in you. Impartial history will tell that, when your statesmen were hostile or coldly neutral, when many of your rich men were corrupt, when your press - which ought to have instructed and defended - was mainly written to betray, the fate of a Continent and of its vast population being in peril, you clung to freedom."

The old Chartist agitators now popped up. "Working men," veteran Chartist Ernest Jones told a demonstration in Ashton: "I say the South is your enemy - the enemy of your trade, the foe of your freedom, a standing threat to your property. Slave labour is direct aggression on the free labour of the world. The key that shall reopen our closed factories is the sword of the victorious North."

But this was essentially a civic movement - an alliance of workers and liberal politicians.

At a mass meeting in Manchester's Free Trade Hall, on New Year's Eve 1862, attended by a mixture of cotton workers, and the Manchester middle class, they passed a motion urging Lincoln to prosecute the war, abolish slavery and supporting the blockade - despite the fact that it was by now causing them to starve. The meeting convened despite an editorial in the Manchester Guardian advising people not to attend.

Mr Lincoln, in a letter dated 19 January 1863, 150 years ago on Saturday, replied with the words that are inscribed on his statue:

"I cannot but regard your decisive utterances on the question as an instance of sublime Christian heroism which has not been surpassed in any age or in any country.

"It is indeed an energetic and re-inspiring assurance of the inherent truth and of the ultimate and universal triumph of justice, humanity and freedom… Whatever misfortune may befall your country or my own, the peace and friendship which now exists between the two nations will be, as it shall be my desire to make them, perpetual."

The American Civil War, then, was a chapter in British social history, and the audiences for Speilberg's film, discovering the incredible radicalism and eloquence of President Lincoln are not the first Brits to be mesmerised en masse by the self-educated lawyer from Springfield, Illinois.

Maybe one day we will get a movie worthy of men like John Bright and Ernest Jones.

In 2007 Paul Mason told the story of the rise and fall of the cotton industry which shaped Lancashire in the Radio Four series Spinning Yarns.

This is the wall against which, between 1939 and 1956, two thousand three hundred people were executed. They were Republican prisoners, brought from jail in batches of fifty - men and women on the losing side in a civil war.

At the base of the wall there is a crisp and withered wreath draped in the colours of the old Spanish Republican flag, laid by the "Socialists of Paternas", the area of Valencia we are in. Last year's wreath lies discarded. And that is it. No sign to explain. No official curation of the site at all.

"The victims are paid homage only by friends and family," says Matias Alonso, my guide; "Officially this place doesn´t exist."

Mr Alonso is one of the unofficial curators of the site. For him, the state of the place demonstrates modern Spain's big problem with the Civil War: it has officially been forgotten.

General Francisco Franco died in 1975. Two years later, as King Juan Carlos oversaw the transition to democracy, an amnesty law was passed, forbidding the investigation and prosecution of crimes, not just during the Civil War, but throughout the entire Franco regime.

In 2007 the-then socialist government passed the Historical Memory Law, promising state help in the finding and exhumation of mass graves.

But historical memory in Spain is a politically contested space: the Partido Popular, which now governs Spain, opposed the Memory Law and promised "not one public euro for the exhumation of mass graves". They have now cut funding.

For Mr Alonso, a socialist who worked clandestinely during the last years of Franco, the problem is not about history, or memory, but about now.

Spain has decided to re-live the 1930s, economically, inflicting the biggest austerity programme in modern times on an economy where there is already 25% unemployment. Mr Alonso believes the failure to "de-Nazify" the old political elite in the 1970s poses a danger today:

"There is a big danger. When there are people in the government and the city halls that have not rejected the values for which many democrats were killed, nobody can make sure that - when the crisis hits - they don´t take their modern suits off and come out with their [fascist] blue shirts and the killings start. And that worries us."

I have been reporting the Spanish crisis for the past two years and it seems to me, up to now, that the institutions of Spain have been resilient. If it is true that, among the octogenarians of the business elite, there are people with a fascist past, it is also true that the compromises made in the 1970s have held.

The socialist PSOE and the conservative Partido Popular (PP) have alternated in power for decades; and as the economic crisis has hammered Spain there has been no rapid emergence of a hard religious right-wing party, such as Laos in Greece, and no mass fascist movement such as Golden Dawn.

Meanwhile the Communist Party, which prospered in the post-Franco political truce, is growing.

But if you get down to Cabanyal, the tough working class area at what used to be Valencia's dockside, you can see the threat to the status quo.

In the boxing ring, Sento "Tsunami" Martinez is showing one of his pupils where the Tsunami bit of his name comes from: he is showering a tidal wave of blows into the target gloves, as another twenty or so young guys hammer the punch bags and pour sweat.

These are young working-class men and the crisis has hit them hard. The official statistics say 50% of Spanish people under the age of 24 are jobless. Sento reels off some other stats that show the impact:

"Four years ago there were ninety professional boxers. Now there are two hundred. So one hundred and ten boys have gone from amateurs to professional boxing because they need the money. What you get is not much, but it helps now with the crisis."

But the value of the fight purse has fallen. If you can go six rounds with Sento you can earn maybe 1,200 euros - enough to live on for a month. Sento, with the lean, punched face and intense alertness of the trained fighter, does not look like a man anybody could go six rounds with:

"Many of the boys that come here cannot pay for the gym so I train them for free. I'd rather have them here than on the streets robbing, on drugs or anything else. We have a sporting and healthy atmosphere, discipline and a routine."

But Sento is no ordinary fighter. For him, this combination of slugging and social work serves a higher purpose: "I am a national socialist," he tells me cheerfully. "My hero is Rudolf Hess."

"This is not a democracy, this is a dictatorship that they have built up, and that is Spain´s problem," he tells me - referring to the two-party system that many here believe is the root of Spain's vast corruption problem.

The answer? "I'd go for a revolution. Not from the left but from the right. I believe in a national revolution."

Sento is a supporter of the far right party Espana2000. It has been a small current up to now, run by people who were trying to practise right wing street politics even in the last days of Franco. But now it is recruiting fast, 70% of its membership is young, male and working class.

And for Sento "Tsunami" Martinez, the word revolution has a specific meaning:

"As long as people have food there will be no revolution. The revolution will come when there is no bread left. Then we will see shootings and everything."

For now, there are no shootings. But there is action. On 15 November 2011 Espana2000 organised a march to close down a small mosque in the nearby small industrial town of Onda. The party's own video of it shows a disciplined march with lighted torches, under the banner "Stop the Islamic Invasion."

The police prevented the demo passing the front of the mosque, which serves mainly migrants from North Africa.

In September this year the mosque was firebombed, when somebody poured lighter fluid through the door and set it alight. Espana2000 says it had nothing to do with the attack. The police have failed to identify the attacker.

Inside the mosque, one of the teachers there, Mohammad Hicham, tells me the whole experience has made them scared. What is causing it is "the crisis", he says, is the lack of jobs for local people and their lack of understanding of the past:

"In North Africa we study the history of France and Spain. We know what went on under Franco. Sometimes I think the Spanish people, especially young ones, do not know what went on at all."

Espana2000's leader is Jose Luis Roberto. He is a veteran of the far right, arrested but acquitted during the last days of Franco during a bombing campaign. He is a lawyer; he is also the head of the security industry body in Valencia, and runs several gyms, a security firm, and shops selling uniforms to the police.

I meet Mr Roberto in the community centre the party has set up in one of the poor neighbourhoods of Valencia. It is a courtyard, with a second hand toy and clothes stall and in the corner a big paella pan bubbling on a wood fire. This is for the soup kitchen the party runs, for those on the breadline. It is also a library, and has five rooms for people who have become homeless. We do not serve "Moors" he tells me, meaning Arabs.

As Mr Roberto gives me a tour I notice cards celebrating Gen Franco displayed, alongside much heraldry concerning Spain's monarchic past, and firearms magazines on the coffee table:

"The image of Franco was a lot worse 20 years ago than now. People realise that they had a job, a house, worked like crazy, but managed to even have a second house, they could pay for their children's education... old people see that. The ones who lived in his time, they see it. Many people not just in Espana2000, but in the PP and PSOE, see Franco positively now. He never took our Christmas pay away."

Mr Roberto explains his party's programme: import controls, reducing the power of the autonomous regions, the creation of "one big Europe" involving Russia. On social services he tells me:

"We would establish a preference for Spaniards, Spaniards would be the first ones to get everything."

The party's social makeup is mainly working class, and its target areas are the poor housing estates. It rejects the label fascist:

"They criminalise us and say we are evil. People come to us and see we are not that way. We are growing because people talk about us and more and more people come to us. Around 35-40 people are joining us every week. In a country where people are disappointed with politics that's good. There will be a moment in which this will take off."

I challenge him on the anti-Mosque demo, in the context of the firebombing:

"Espana2000 are not the only people affected by the mosque. It could have been anyone. We are against the burning of the mosque, but if a member of Espana2000 or a neighbour in their private life did it, we are not responsible."

I ask if he regrets the firebombing: "We don´t speak for others, it is not our business. If somebody did it he must regret it, we cannot regret it," he says.

Right now the party is assembling the activists and establishing a small local presence on elected bodies, just as the much bigger Golden Dawn party did in Greece. Its profile - in the security industry, in boxing gyms and military apparel stores - is very similar to that of the core grouping that leads Golden Dawn.

I put it to him that it is playing with fire to use torchlight parades, Francoist imagery in a country that had a civil war and where social conditions are leading to unrest:

"Playing with fire? Have a look at people here. When people are leaping off their balconies because they can´t feed their children; where young people don't have a future, are we playing with fire? We will probably end up playing with fire as politicians are leading us to a situation in which we will end up having a social revolution."

"We will use all democratic ways... But if we reach an extreme situation we will have to hit the streets and use the force if necessary to avoid people from being in that situation."

How will he know it is time to use force, I ask the veteran far-rightist?

"It is like carrying a gun. When you have one, how do you know when to use it? The best thing is not carrying it or not using it. But when you have to use it you just know. Obviously it is not the right time yet, but when it comes, we won´t need to have a meeting to discuss it, we will just know."

In the cemetery at Paternas, just a couple of hundred yards from the execution wall, there is a reminder of what happens when people resort to force instead of democracy.

Plots, twelve feet square, each containing one day's worth of executed prisoners. The families were allowed to state their name and place of birth on the collective tombstones, but not the cause of death. On the plot marked 17 November 1939 I counted 53 names including "an unidentified woman known as Rosa".

Nearby, under an awning, Matias Alonso and his colleagues have an exhumation in progress. Beyond the main graveyard there is a wide plateau which Mr Alonso believes contains the bodies of maybe one thousand more victims. Due to the withdrawal of government funding it will not be exhumed.

The Spanish Civil War killed maybe three hundred thousand on the battlefield with both sides indulging in post-combat executions running into tens of thousands. After the war there is no adequate account of how many were executed, but there are more than one hundred thousand missing persons from the post-war period.

Today, the surviving families at Paternas have erected smaller individual headstones, including photographs, on the top of the collective ones. Standing there amid the birdsong and plastic flowers is a sobering experience.

The small oval portraits show men who did not need to be politically radical to get shot. Though some were Communists, others were socialists or liberal republicans: they were fighting for democracy. And the dead were generally killed in their 30s, 40s and 50s - not the classic age profile of the combatant.

In Germany, and the lands it occupied during World War II, there are huge and moving memorials to the victims of fascism. The "execution wall" at Auschwitz has become a site of pilgrimage for democrats and opponents of racism. And in some European countries denying the Holocaust remains a crime.

In Spain, forgetting who did what under Gen Franco is the law. And the execution wall at Paternas is hidden within a rubbish dump.

There were strong reasons for what is now called the "Pact of Forgetting". It seemed to allow Spain to democratise rapidly - and with European Union and euro membership, and prosperity, there seemed little chance that the old wounds would be re-opened.

But the economic and social conditions that underpinned that assumption are unravelling. The street actions of the far right and far left are ramping up - with mass demos by the unions and the so-called indignado youth regularly turning violent.

It may be that the legacy of the boom years, the strength of the Spanish two-party system, or simply cultural differences make it impossible for a Golden Dawn-style breakthrough for the right in Spain.

But it may simply be that Spain got bailed out in a softer and more intelligent way, in a move designed to preserve political consensus rather than destroy it, as happened in Greece.

If so, the scale of anger and contempt I've found among the young while reporting from the streets of Spain this year points to one thing: that bailout had better work.

Under Mao Zedong, Yang's good fortune was to find a job as a reporter with China's state-run Xinhua news agency. His misfortune had been to see his father die of hunger in 1961, at the height of the famine that killed an estimated 36 million people:

"When my dad died, I thought it was just my family's problem. I blamed myself because I hadn't gone back home to pick wild plants to feed my dad. Later on, the governor of Hubei province said millions of people had died. I was astonished," Yang says.

In the 1990s Yang, by now a senior editor at Xinhua, used his status to secretly research the truth about the famine in 12 different provincial archives:

"I could not say I was looking for data about the famine, I could only say I was looking for data about the history of China's agriculture policy. In the data, I found a lot of information about the famine, and people who starved from it. Some of the libraries allowed me to take photocopies; some only let me write the information down. These," he gestures casually at a teetering pile of brown envelopes on the floor, "are the photocopies".

The result was Tombstone: The Untold Story of Mao's Great Famine, published in the West this year to high acclaim.

Yang, aged 72, is neat, small, swaddled in two jumpers despite the shafts of winter sunlight that stream across his desk. He is rummaging through his shelves on the hunt for a book whose title is important: by a Western author whose name has slipped his mind.

"Something about slavery?" he says. I try the name Hayek and after a bit of transliteration it works. He had stumbled on Friedrich von Hayek's The Road to Serfdom in a library and chuckles with mild scepticism when I tell him it is probably the most influential book in Western economics:

"Before I read Hayek, I had only read works the party wanted me to. Hayek says that to use the state to promote a utopia is very dangerous. In China that's exactly what they did. The utopia promoted by Marx, even though it is beautiful, it is very dangerous."

Even now, 50 years on, Chinese official history insists the famine of 1958-61 was a natural disaster. Yang's work demonstrates the famine's massive scale and its direct, political causes.

Agriculture was brutally collectivised, leaving peasants dependent on centrally distributed grain. Local cadres ordered the forced pooling of family kitchens, confiscating all ladles and punishing those who kept private food supplies.

Then, as Mao ordered rapid industrialisation during the Great Leap Forward, the grain supplies disappeared. Simultaneously local officials, terrified of failure, began to report fictional bumper harvests. Mao, meanwhile, publicly humiliated any party leader who voiced doubts. The result was the greatest famine in modern history.

It is Yang's refusal to duck the parallels with today that make his book unpublishable in mainland China. The famine happened because the party was all-powerful, he argues - just as numerous disasters visited on China by today's leaders - from the HIV-infected blood selling scandal, to the spread of Sars, to the shoddy buildings that collapsed during the Sichuan earthquake - are the result of unfree politics and an unfree press.

Despite its samizdat status, Yang thinks there may be around half a million copies of the Hong Kong edition circulating in China. His own copy, discreetly kept in a cupboard, is a black-market version of the latter: its pages are photocopied, its binding stiff, shiny and amateur.

"It is estimated that there are about 100,000 of these knock off copies in circulation," he says. "People try to bring the real ones from Hong Kong but they get confiscated, so they make these. The response is very strong, I have received lots of letters from readers telling me the stories of relatives who died from the famine."

The English language version has made a massive impact, with some calling Yang the Chinese Solzhenitsyn. To me, however, he seems more like the Chinese equivalent of Vasily Grossman: though he believes Marxism is a dangerous fantasy he remains a party member. His haunting prose - like Grossman's - defends the power of memory:

"China has undergone an enormous transformation. But… the abuses under the exclusive profit orientation of a market economy and the untrammelled power of totalitarianism have created an endless supply of injustice, exacerbating discontent among the lower class majority. In this new century I believe that rulers and ordinary citizens alike know in their hearts that the totalitarian system has reached its end." (Tombstone, p22)

What is it like, I ask, to be an historian in a country where historical memory is so completely suppressed?

"Very painful," he says. "We learn a lot about history. However, most of it is fake. It is full of made-up stories to meet the needs of ideology. Once you realise you've been cheated, you'll begin to pursue the truth. That's what I did: I've been cheated, so I want to write the truth - however risky it is."

Though retired from Xinhua, Yang is still active. The small political magazine he runs out of this tiny office seems, from piles of unsold copies stacked up in the corridors, not massively influential. He thinks it will take 10 years to publish Tombstone in the People's Republic, if the political reform process keeps to its current glacial pace.

But like all dissident writers in China, he has learned not to hurry.

He pinches green tea leaves for me into a paper cup, and pours hot water from a flask. There is a barely-touched and ancient computer in one corner of the room, but Yang's conquest has been made in the world of analogue information: photocopies and scribbled notes.

He pats the English edition contentedly, still stunned by the price the publishers Penguin are charging for each one:

"Tombstone has four layers of meaning. The first is for my father who died in the famine, another is to remember the 36 million people who died during the famine. The third layer is a tombstone for the system that killed them."

And the fourth?

"The fourth is - the book has put me at political risk, so it's a tombstone for myself if anything happens to me because of writing it."

See Paul Mason's report on Yang Jisheng and other writers whose work is banned in China, on Newsnight Wednesday 21 November at 2230 on BBC Two, then afterwards on the BBC iPlayer.

Then the queuing started. While the Communist Party's 18th Congress elected its Central Committee, we, the journos, queued, and queued and finally sat on the carpet and slumped against the marble walls and queued some more.

It was great to be among the Chinese media: the PLA newspaper reporters in their military uniforms, the niche party papers like the Global Times, whose reporters I hooked up with.

Eventually, amid the inevitable Chinese rugby scrum, the barcodes and order gave way to a flurry of pushing and shoving and we were in - to another queue.

Only this queue was in a corridor overlooking the car park for the Party's highest dignitaries.

A vast array of black Audi Sedans, which we immediately dubbed the Great Audis of The People.

When I say we, I mean me and a few other Western journalists - though all the Chinese reporters sneakily had their photos taken against the scene: unusable but to be pinged around among their mates on semi-private social networks.

Then we were finally in. And here is the weird thing: the Congress takes up the ground floor and the entire stage.

The first balcony is the media and an outsize brass band. The second balcony - designed for 2,500 spectators - is empty.

The fact is, the Great Hall of the People does not see many of the actual people these days.

And that is a shame.

Because whatever you think of Jiang Zemin, Hu Jintao and the new leader Xi Jinping - and views range from murdering dictators to the last best hope of capitalism on Earth - it is a buzz to see them live.

Even if Jiang sits there like a grumpy old guy who nothing can impress. Even if Hu's speeches are stilted. Even if Xi spends the whole session shifting impatiently in his chair like a guy in a hurry at the barbers.

These are the men who influence the daily lives of one sixth of humanity and whose struggles with cruel fate, mass unrest, and a crumbling international order will influence the lives of all of us.

There is, when the votes are taken, or when the leaders are interacting with the delegates in the hall, an informality it is hard to capture with a camera.

There is this ritual they go through when the votes are taken:

"Any against? Any in abstention?"

And each section of the hall has to pipe up "meyo" - "none".

So you just hear "meyo, meyo, meyo" in different voices until the chairman declares - and not in a cynical way but in a very joyful voice - "Passed! Well done!"

After several rounds of "meyo" I have to confess a slight ripple of suppressed laughter went around - and not from the hacks in the gallery.

There was, I swear it, a slight titter across the floor - whether coming from the gaudily dressed ethnic minority people, or from the army, or from the youth league nobody knows. Hu Jin Tao even looked up and smiled, getting the joke.

Put any bunch of humans into a human situation and they act like humans, not stone monoliths, even when they are surrounded by monoliths.

What the congress decided today was to write Hu Jin Tao's theory of scientific development in to the party constitution, so that the official ideology of Chinese Communism is now - take a massive breath: Marxism-Leninism-Deng-Xiao-Ping-Thought, Important Theory of the Three Represents and the Theory of Scientific Development.

Put another way, they have added to Jiang's theory that the Chinese Communist Party (CCP) should represent the bourgeoisie, Hu's idea that they should do it nicely.

And to Jiang's legacy that economic development should take place at the cost of destroying nature, they have added Hu's attempts to stop it doing so.

And to Mao - who asked Chinese people to "criticize Confucius", they have added the post-Jiang doctrine that China is really a 2,000 Confucian civilization, and that the 20th Century, with its strikes, wars, famines, experimental films, feminism, surrealism, etc - was just an aberration.

But it is still a puzzle why the masses are not let into the hall.

On the way there I saw numerous crowds of black-clad men on street corners, who the Chinese call, affectionately, "hooligans" - put there by the state to beat up anybody who looks like they might make trouble.

On every corner there are elderly women in uniforms patrolling their neighbourhood voluntarily.

With that, and biometric ID cards and an internet police that is the envy of the world, you could surely find 2,500 members of the public who would come and go ecstatic as the old troopers on the platform stumble through The Internationale.

Certainly nobody in the press made trouble: not even me, nor Channel Four News, nor The Guardian. We sat, watched, recorded.

But the Great Hall of the People minus the people is, for now, essential to the theatre of Chinese rule.

Disgraced leader Bo Xilai made the mistake of projecting a distinctive political platform - a kind of corrupt leftism - and rousing the masses with "Red Songs" and Maoist rhetoric to support him - and crush his enemies - in the name of an anti-corruption drive.

The all-seeing party tolerated this for years but is now, like Claude Rains in Casablanca, "shocked, shocked" to find corruption going on, and stands ready to round up the usual suspects.

What it does not want is an energized population - even in its own support.

Outgoing leader Hu has achieved a lot.

You have to acknowledge that, even at the price of the foregoing sentence being lifted, verbatim, on its own in one of the montages of "foreign media praise" for China that are being run by the People's Daily.

He has unleashed fiscal stimulus, saved his own and the world economy from slump, instituted the beginnings of a social welfare system, normalized strikes so that they become a jailing and riot police affair rather than a shooting and life sentence affair.

In the name of suppressing chaos Hu has tolerated a kind of controlled chaos: the seizure of land - and its seizure back - in low-level peasant warfare. Immolations in Tibet, regular walkouts at Foxconn.

But now it is decision time. Tonight they will decide the composition of the incoming Politbureau Standing Committee - and its size.

We, the journos, will read the entrails of who is who on that committee and make a stab at whether the market plus dictatorship faction, or the social market plus soft-power faction, has the upper hand.

And then, paradoxically, we will guess how far the "market plus dictatorship" faction is prepared to be pragmatic, bending with the wind like a reed etc.

But nobody knows. The suppression of facts, history, historical memory, books, rational argument, unorthodox driving styles, and randomly unthreatening pages on the internet means nobody can really know anything.

You just have to judge China by its actions. Today was an exercise in controlled power: the controlled handover, the obsessive control of the press ("DSLR cameras this way, digital video cameras that way").

But the abiding symbol I will take away from my first ever time in this historic place is the empty second balcony.

Two and a half thousand seats they would rather leave empty than fill with cheering, loyal and hopeful people.

Empty leather and polished wood. A silence into which the votes, the Internationale and the camera shutter clicks could float and disappear.

If so David Karp has raised a heck of a lot of money on the back of funny cat pictures. The 26-year-old who invented Tumblr is currently burning through $125m of venture capital in his quest to make Tumblr, at some point, make money.

"It started pretty modestly," he says, "I had tried to set up blogs, I tried to tweet, used Flickr and Delicious, I wanted something that allowed me to be more expressive, to present myself in a way I was proud of."

So Karp, who had dropped out of high school and went straight into the digital media business in his teens, built Tumblr.

If you are wondering what Tumblr is you are probably a) over 24 b) not involved with Occupy Wall Street c) not a member of the teenage-girl-nail-art subculture. And you have no idea what social curating is.

Curating is the new buzzword in the media: it even worked its way into the recent mission statement of BBC boss George Entwistle.

So… curating is somewhere between creating and consuming: you pull together stuff you like, photos, animated GIFs, YouTube videos, quotes. Much as modern dance music is made up of samples, and postmodern art made up of "found" objects, re-assembled by the artist, Tumblr is about using the found to say something different.

"Even if you're not the guy who gets in front of the camera and plays guitar," says Karp, "you can still express a point of view, be creative, through the stuff that you select."

"At the core we have this community of millions of creators who make the stuff - and around them this big web of tens of millions of curators, people who are slicing and dicing it into little channels, blogs full of the stuff they care deeply about. And they have this big audience of 150 million people who show up every month who can find the content organised into channels that can be so nuanced, thoughtful and specific."

As millions of people share similar content, what digital theorists call "memes" are created. Common themes, images, sayings etc that define the zeitgeist and proliferate, morph etc.

Tumblr is an extraordinary powerful amplifier of memes: instead of posting, say, a funny cat picture to Facebook, I will reblog it from somebody else - getting on the bandwagon, so to speak. But then my page may contain two or three entirely separate bandwagons. Probably the best known meme originating on Tumblr in the past year was the "We are the 99%" stories from Occupy Wall Street.

If I look at my own Tumblr account - I've had one since an art activist called @spitzenprodukte told me doomily "Facebook is over" - it does not quite conform to the anti-narcissist joke I began with.

So my meme creation tends to involve: Liza Minnelli (I know), dance numbers featuring Rita Hayworth (I said I know!). That's alongside Gettysburg the movie and numerous Northern Soul tracks, photos of Frida Kahlo, Manhattan in the 1950s and - big error this - a GPOY.

GPOY stands for "gratuitous photos of yourself" and is more or less obligatory on Facebook but deeply uncool on Tumblr.

Other stuff I've posted includes graphs of Spanish debt; blogs the BBC system was too, er, analogue to accept on a Sunday morning.

What has caused Tumblr to take off is the relative difficulty of achieving this level of narcissism (or self-expression) even on the uber-platform Facebook.

Says Karp: "We're giving them tools to make create an identity they can be really proud of; you do it on a page you can control completely. No two Tumblr blogs look alike."

And the Tumblr demographic is seen as politically significant. Though it has only 150 million users - compared with Facebook's one billion - there is a different emotional intensity, and a cliquishness: very few people find their grannies and aunties, or old school friends in their Tumblr social network. It's more likely to be people who share the same obsessions.

Tumblr, anecdotally, is in America at least not just quite young but quite working class: there's a lot of tattoos, piercings, trailer lifestyles. There is a troubling amount of self-disdain: it's easy to summon up a screen full of anorexic young women, people suffering depression, graphic images about teenage self-harm. And of course pornography.

But despite the sleazy - or is it just brutally honest - side of Tumblr, this critical demographic reach has brought campaign managers from both sides of the US presidential race onto the platform.

I ask Karp what the content posted on Tumblr is telling us about the world:

"Ten years ago there were maybe hundreds of people creating digital content; I wanted to be one of those prolific people, with an identity and a presence. Today there are millions of people making stuff and putting it into the world: that's become part of our identity and it shouldn't be limited to people who fancy themselves writers, or who are particularly witty or talented: curation is a new, more accessible way to express yourself."

"We used to have a text blurb on our networks, the Geocities - a blank slate you hacked together; then MySpace where you had more structure but you could still hack it to pieces: it was ugly, but it was still very personal, if a little janky looking. Then we got Facebook and we left all that behind, everybody had the same vanilla page, in a big directory of other people."

Ultimately for Karp the challenge is to make money. There are reports that investors are getting antsy about the lack of a coherent business model.

He tells me his first aim is to keep the product simple: to allow the space itself to be a basic platform with third party developers (my own Tumblr blog front end cost me about £10 from a specialist designer, though most people opt for the free customised version).

"Our model is pretty simple: we have the attention of an audience of 150 million people - we're selling a little sliver of that attention to marketers. How you do this in a zen-like interface, it requires an enormous amount of care. You don't want to bolt on a button to your Kindle to make ads go away - so we have built advertising into the endemic features," Karp says.

But he believes the momentum is with the content creators. The smart phone is turning more of us into creators, even if - as we cluster around the same mass events using the vintage photo effects - a lot of our "creations" look exactly the same:

"All of this stuff is gated on the hardware: Apple and Google are pushing the hardware so far, so quickly... and as the creative horsepower moves faster and faster the software is going to explode: there is a whole ecosystem of creative apps. So what I am most excited about is what people are making."

Tumblr is going to face challenges over the use of other people's content, let alone censorship issues over the amount of porn, self-harm etc that presents itself on the simplest of searches.

But whatever happens commercially, Tumblr is yet another straw in the wind of the social media revolution.

MySpace went big, was bought by Rupert Murdoch and then declined. Facebook killed MySpace, went public at what looks like a massively over-valued price, and now faces big questions about how it will make money going forward.

Tumblr - and its rival "curating" platforms - are one clue as to what might, one day, if this is even thinkable, kill Facebook. Facebook, to me, is increasingly like a family living room at Christmas in the 1970s, with a lot of people I am supposed to be polite and friendly to.

Ultimately we are all, inside, still teenagers in our bedrooms, and Tumblr is like a bedroom wall where you can pin anything. And shut the door to keep your parents out.

Watch Paul Mason's full interview with David Karp on Newsnight on Thursday 1 November 2012 at 10.30pm on BBC Two, then afterwards on the BBC iPlayer and Newsnight website.

Kurt Weill's The Silver Lake, written with playwright Georg Kaiser, tells the story of two losers - a good-hearted provincial cop and the thief he has shot and wounded - as they make their way through a society ruined by unemployment, corruption and vice.

After spending a week again in Greece - amid riots, hunger and far right violence - I finally understood it.

The opera was meant to be Weill's path back into the mainstream. It was his first break from collaborating with Bertolt Brecht, and was scheduled to open simultaneously in three German cities on 18 February 1933.

But on 30 January Adolf Hitler was appointed Germany's chancellor.

The first performances of The Silver Lake were disrupted by Nazi activists in the audience and on 4 March 1933 it was banned. The score was torched, together with its set designs, in the infamous book-burning ceremony outside the opera house in Berlin.

It is easy to see why the Nazis didn't like The Silver Lake. Weill was Jewish; the Nazi theatre critics found the music "ugly and sick". Moreover the plot contains an allegory of the political situation on the eve of the Nazis' rise to power.

But there has always been something else about The Silver Lake that goes beyond politics. Something hard to fathom.

Spending time in Greece, as the far right Golden Dawn party breaks up theatre performances with impunity, and street violence is common, I finally know what that something is.

The Silver Lake is ultimately about how people feel when they switch from resistance to hopelessness. And about how strangely liberating hopelessness can be.

Greece right now is a place with a lot of hopelessness. Its own prime minister, Antonis Samaras, has compared its atmosphere to that of the Weimar Republic.

"Greek democracy stands before what is perhaps its greatest challenge," Mr Samaras told the German newspaper Handelsblatt. He said social cohesion is "endangered by rising unemployment, just as it was toward the end of the Weimar Republic in Germany".

The comparison seems plausible: there are far right gangs meting out violence on the streets - a report last week identified more than half of all officially recorded racial attacks as perpetrated by people in paramilitary uniforms. Every demonstration ends with tear gas and baton charges.

There is mass unemployment. There is the collapse of mainstream parties. The press and broadcast media are struggling to remain independent, indeed solvent.

Yet the comparison with the "end of Weimar" only holds if you know nothing about the Weimar Republic itself.

Sadly this condition is common. School students are rightly taught lots about Nazi Germany - but not very much about the detail of how it came into being.

Here's a short summary. In the elections of 1928 the Nazis, who had - like Golden Dawn in Greece - been reduced to a splinter group in the years of economic recovery, got just 2.7%.

But in March 1930, as the Wall Street Crash cratered the German economy, a cross-party coalition government of the centre left and right collapsed. It was replaced by the first of three "appointed" governments - designed to avoid either the communists or the now-growing Nazis gaining power.

It was led by Heinrich Bruning. Faced with a recession, Bruning followed a policy of austerity, while keeping Germany's currency pegged to the Gold Standard (much as Greece as follows a policy of austerity dictated by euro membership). This made the recession worse.

As unemployment rocketed, so did the Nazi vote: in a shock breakthrough they came second in the elections of September 1930, with 18%. But Bruning was determined to crack down on both the right and left: he banned the Nazi paramilitary organisation, the sturmabteilung, along with the rival communist uniformed militia.

As recession worsened, the Nazis grew massively: they won the election in 1932, gaining 14 million votes (37%). The socialists and communists combined polled higher. And the parties of the centre collapsed. Yet the presidential system of appointing governments now allowed these very centrist parties to go on ruling Germany - now under a new Chancellor, the aristocrat Franz Von Papen.

Von Papen unbanned the Nazi stormtroopers in June 1932 and, as historian Ian Kershaw puts it in his definitive biography of Hitler: "The latent civil war… was threatening to become an actual civil war."

By the end of 1932, with the communists now also growing rapidly, the political establishment made one last final attempt to keep Hitler out of power. Right wing general Kurt Von Schleicher was appointed chancellor, and tried to form a government with everybody from the left wing of the Nazis to the socialist trade unions. But this too fell, opening the door to Hitler.

Kershaw wrote: "Only crass errors by the country's rulers could open up a path [for Hitler]. And only a blatant disregard by Germany's power elites for safeguarding democracy - in fact, the hope that economic crisis could be used as a vehicle to bring about democracy's demise and replace it by a form of authoritarianism - could induce such errors. Precisely this is what happened." (Hitler: Hubris)

These names - Bruning, von Papen, Schleicher - troublesome though they are to remember, should be as famous as the words Stalingrad, Arnhem and Dunkirk.

These were the men who tried and failed to use a mixture of austerity, tough policing and what we might now call "technocratic" rule to save German democracy. They failed.

And herein lies the parallel with Greece: a country committed to austerity, whose centrist parties are clustered into a coalition which represents the forces of conservatism and social democracy. The coalition sees itself as the last bulwark against a government of the far left and is trying to crack down on extremism using a police force which has itself been criticised for extremist leanings.

But despite these parallels, Greece is not on the brink of a Weimar-style collapse.

Nor is it "in civil war" as claimed by a leader of the far right Golden Dawn movement on Newsnight last week. If anything, Greece has levels of instability and political radicalisation close to the levels seen in Germany in early 1930, not late 1933.

The problem is: Greece is approaching 1933 levels of economic collapse.

Unemployment was 30% in Germany when Hitler took power; it is 25.1% and rising in Greece. GDP collapsed by about 7% in both 1931 and 1932 in Germany. Its current rate of collapse in Greece is roughly the same: 7% per year. Germany's banks had gone bust in 1931. Greek banks are effectively part nationalised already.

You can see the physical impact of this on Stadiou Street in Athens. I have reported from there numerous times in the past two and a half years, but this last time it looked desolate.

There was an arcade where, just over a year ago, I remember blogging about how small specialist businesses in Greece were doomed: the pen shop, the stamp collecting shop, the stationary store. They're all gone now.

So is much of the street itself. The Art Nouveau cinema burned out last year; the Marfin Bank, next door, torched with the deaths of three workers during a riot in 2010.

On the walls somebody has spray-canned "Love or Nothing". Right now there is a heck of a lot of nothing: shops closed, stripped, barred, graffitied, the fascias chipped off as ammunition in riots, burned out, gone.

And nowhere is the human impact of this weird situation, clearer than when you talk to young people.

I met Yiannis and Maria in a bare flat in Exarchia, the bohemian district of Athens. Despite their bruises and bandages they took some persuading to go on camera - anonymously and in their hoodies - to put on record their allegations of brutality in police custody.

What struck me, beyond their allegations (which are denied by the police, but partially corroborated by a coroner's report), was their detachment from regular life.

They expected the police to be brutal, and to be fascists. They were outraged that they'd had to listen (they allege) to Golden Dawn propaganda in the police cells. But they were reluctant to bring a complaint within the system.

For tens of thousands of young people life is already lived in a semi-underground way: squatting instead of renting; cadging food and roll-ups from their friends. Drifting back to their grandparents villages, sofa surfing. Yiannis is a sporadically employed technician in a cultural industry; Maria a highly qualified professional who waits table.

The British author Laurie Penny has captured the situation in a recent memoir of a trip to Athens: "We came here expecting riots. Instead we found ourselves looking at what happens when riots die away and horrified inertia sets in." (Penny L and Crabapple M, Discordia, Random House 2012)

Horrified inertia is now seeping from the world of the semi-outlawed young activists into the lives of ordinary people.

What people do - whether it is the black-hoodied anarchists in Athens or the young farmers in Thessaly on their third of fourth bottle of beer by lunchtime - is retreat into the personal.

It's no longer "the personal is political" - but the personal instead of the political. True, demonstrators still turn out in large numbers, as in last week's General Strike. But they go through the motions - of demonstrating, of rioting even.

"It's just for show on both sides, the cops and the anarchists," I was told by my Greek fixer as we legged it through stampeding people and tear gas.

A year ago the buzzword was "anomie" - the fear of anomic breakdown, in which small groups and communities just give up on law and order and make their own. I reported on it then:

There is not even much anomic activism anymore; the movement that defied road tolls and disrupted the sale of repossessed homes - which was large in the Spring - is tiny now.

If anything captures the buzzword of late 2012 in Greece it is the person who sprayed the slogan "Love or Nothing". It's less about anomie, more about depression.

What has depressed much of Greek society - from the liberal centre right to the liberal left - is the rapid rise of Golden Dawn.

In the two elections of May/June 2012 it scored between 6-7%. Nothing like a 1930-style breakthrough.

But it has begun to do DIY law enforcement against migrants with no intervention from the police. At street markets in Messolonghi and Rafina its uniformed activists checked the permits of migrant stallholders, demonstratively destroying those who did not have permits.

With electoral data showing - on one count - 45% police personnel voting for Golden Dawn, there is rising concern that support for the far right is beginning to skew the operational priorities of the police at local level.

When I challenged Golden Dawn's second in command, Ilias Panagiotaros, he claimed support within the police at "60% or more". And he gave a chilling explanation of how Golden Dawn's extra-judicial actions were affecting the rule of law. Referring to the market stall attacks he said:

"With one incident, which was on camera, the problem was solved - in every open market all over Greece illegal immigrants disappeared. There was some pushing and some fighting - nothing extraordinary, nothing special - only with one phone call saying Golden Dawn is going to pass by the police is going there meaning the brand name [of Golden Dawn] is very effective…"

Greece, in truth, has a massive and apparent problem with illegal migration. The centres of many cities are - or were until this summer - full of young, male migrants from Afghanistan, Somalia, Sudan and increasingly Syria.

Many Greeks do fear them, and they perceive them as a threat to social order and a traditional lifestyle - in a country that never had any colonies and therefore did not experience high ethnic diversity until recently.

The new policy - known as "Hospitable Zeus" is to round migrants up and put them in camps: police in plain clothes or uniforms visibly stopping every person of colour on the street, checking their papers, and if the papers are not in order processing them ultimately to a migrant detention camp.

Even as human rights groups protest this, and demand access to the camps, Golden Dawn has protested outside them on the grounds that conditions are too good there, and that deportations are not fast enough (about six thousand have been detained, with maybe three thousand deported). And even as the police round up the migrants, Golden Dawn's policy is to terrorise them off the streets, and mount a legal campaign against companies who employ them.

The Greek media, meanwhile, has taken its cue to reinforce the association of migrants with crime. For those seeking an alternative view there are only the newspapers of the far left: the main liberal newspaper - Eleftheropia, an equivalent to the Guardian - went bust and has closed.

Economically, the Greek coalition is getting ready to impose the latest and last round of austerity: 13.5bn euro a year cuts and tax rises, in order to release 31bn euro worth of bailout money.

The moment it puts this to parliament we can expect a big and unruly protest. After that the Coalition just has to hold on and hope that its own electoral support does not go the way the German centrist parties went after 1932.

Unfortunately for them, however, electoral support is slipping. While New Democracy has maintained its poll rating at 27% (compared to 29% in the election), Pasok - the former governing socialist party - is down to 5.5%, neck and neck with coalition partner Democratic Left. The combined poll rating of the pro-austerity parties is now 38%.

Golden Dawn polled 14% last week, while the left wing Syriza party is leading the polls at 30% (taking many votes from the Communists, who are now down to 5%).

However, these poll ratings are unlikely to be tested in an election anytime soon. The EU is working overtime to keep the current coalition together, and as Pasok's support dwindles to rock bottom, it has no incentive to risk an election now.

So for the majority of people who want the austerity to stop, and who do not want to be gassed, truncheoned, menaced or even to go on strike, there is only the "love or nothing" strategy.

Anecdotally the use of anti-depressants is rising. Penny's book tells numerous tales of former political activists simply stunned by drink and drugs.

Which brings us back to The Silver Lake.

The "love interest" in Kurt Weill's opera doesn't start until the second half, with the arrival of Fennimore, a young woman trapped in a castle with the two losers and a scheming, reactionary aristocrat who has duped them out of their money.

Once Fennimore appears, the music becomes mesmerised and lyrical; it focuses on the combined hopelessness of the two men and the girl.

And in the final sequence - a dream-like 15 minutes during which the men set out to cross the castle's lake, certain they will drown - there is a mixture of ecstasy and despair.

"You escape from the horror," Fennimore sings; "that may destroy all we know. Yet the germ of creation will struggle to grow."

"All this can be a beginning

"And though time turns our day back to night

"Yet the hours of dark will lead onwards

To the dawning of glorious light."

I have always struggled to understand this ending: why, in the last days of Weimar, did Kurt Weill not pen some anthem of defiance against Nazism rather than a work which, ultimately, expresses resignation?

On the streets of Athens there is already the answer. You can feel what it is like when the political system - and even the rule of law - becomes paralysed and atrophies.

The "hopeless inertia" begins to grip even the middle classes, as the evidence of organised racist violence encroaches into their lives.

Faced with an economic situation dictated by the European Central Bank and the International Monetary Fund, and a street atmosphere resembling Isherwood's Berlin, the natural human urge is not fight but flight.

Flight away from danger - flight into the cocoon of drugs, relationships, alternative lifestyles, one's iPod.

After the first-night disruption of The Silver Lake in Leipzig this is how its director, Douglas Sirk, described the scene at the theatre:

"The sturmabteilung filled a fairly large part of the theatre and there was a vast crowd of Nazi Party people outside with banners and god knows what, yelling and all the rest of it. But the majority of the public loved the play… And so I thought at first, well, things are going to be tough but perhaps it isn't impossible to overcome…[But] no play, no song, could stop this gruesome trend towards inhumanity." (quoted in Kurt Weill On Stage, by Foster Hirsch)

And this is how the director of Corpus Christi, Laertis Vasiliou, whose play was once again disrupted by far right demonstrators in Athens on Thursday night, described it in a message to me just now:

"We went ahead with the performance, which started with two hours of delay because of the fight outside the theatre between the police against the Christian fundamentalists and the Nazis. It was like hell. The noise from outside was clear inside the theatre during the performance. People were beaten up by Nazis and Christian fanatics."

The differences with the final days Weimar, then, are clear. Under international pressure, the Greek state is still capable of upholding the rule of law; centrist parties, though atrophied, still hold the allegiance of more than one third of voters; there has been no decisive electoral breakthrough by the far right.

Crucially, no major business or media groups, and no significant portion of the elite, have swung behind the far right as happened in Germany.

But this flight to inertia, depression, to personal life may also be more pronounced than in Weimar. Weimar Germany was after all a society of intense political engagement; of hierarchical politics, lifelong commitment to social movements, trade unions, military veterans' groups.

So while the crisis may be on a scale weaker than the one that collapsed democracy in Greece, the forces holding democracy together may also be weaker.

When I interviewed Golden Dawn MP, Ilias Panagiotaros, two weeks ago, he was clear as to the party's project: if Syriza wins the election, "we will win the one after that".

"Revolution will take place after two elections by giving first place to Golden Dawn; now we are third, and maybe we will get second place - so it's not a dream that in one, two or three years we will be the first political party."

The leaders of the international community, busy negotiating the last-ditch austerity package that is supposed to precede a strategic rescue of the country know what the stakes are.

If they fail, a whole generation of Greek young people will be left, like Weill's protagonists in The Silver Lake, with a choice between love or nothing.

In it, MP Ilias Panagiotaros claimed Greece was "in civil war" and indeed advocated a new kind of civil war, pitting the far-right against migrants, anarchists, etc.

Within 24 hours Mr Panagiotaros had retracted his claim that Greece was "in civil war", saying instead "there is no civil war" and accusing Newsnight of "paraphrasing" his words. We had simply broadcast them, un-edited and in English.

Now three new reports cast light on the substance of our story - which was: alleged police torture of anti-fascist detainees, Golden Dawn's influence inside the Greek police force, and its potential influence on the operational behaviour and priorities of the police in the Attica region around Athens.

Today, lawyers for 15 protesters who claim they were mistreated and abused in police detention, have shown Newsnight coroners' reports on eight of the detainees.

The most serious of the coroners' documents confirms "grievous bodily harm caused by a sharp and blunt object," requiring the victim to be off work for a month.

Another describes a kind of injury that is consistent with being caused by a taser, as claimed in the original Guardian report.

Fifteen protesters have told us they intend to bring a case against the Athens police.

A second report issued yesterday by the UN High Commissioner for Refugees contains figures for racial attacks in Greece, which are not routinely collected by the Greek government.

It records 87 racist attacks, 48 of which were by members of an identifiable right-wing political group. In other words, more than half the recorded racist attacks are attributable to people dressed in militaria:

"In some cases, the victims or witnesses to the attacks reported that they recognised persons associated to Golden Dawn party among the perpetrators, either because they wore the insignia of the party or because they were seen participating in public events organized by the party in the area," says the UNHCR.

The report highlights specifically a worrying overlap with alleged Greek police racism:

"There is a distinct category of 15 incidents where police and racist violence are interlinked.

"These incidents concern duty officers who resort to illegal acts and violent practices while carrying out routine checks.

"There are also instances where people were brought to police stations, were detained and maltreated for a few hours, as well as cases where legal documents were destroyed during these operations."

Asylum seekers 'tormented'

Finally, in a report issued on Friday, a coalition of NGOs and lawyers representing the legal rights of asylum seekers in Greece slammed the asylum system there.

Despite Greece being a signatory to the EU Charter of Fundamental Rights, which allows people to claim asylum and guarantees them humane treatment, it is physically almost impossible to do so.

Unlike in Britian there is no specific immigration service and the asylum claims system is handled by the police.

Those trying to claim asylum must queue at a remote station overnight each Friday, after which just 20 are "selected" to make a claim.

The report details numerous instances of arbitrary violence, mistreatment, etc of people in the asylum queue and concludes: "Access to the asylum procedure is almost impossible in Attica."

The report by the Greek Council for Refugees says:

"The competent authorities take no measures to ease the physical and mental exhaustion of the asylum seekers, who are subjected to inhuman and degrading torment in order to apply.

"Instead they follow specific practices, such as dispersing the queue of asylum seekers, intimidating them and chasing them way, in order to discourage them from returning and trying to submit their asylum application."

"This irrational practice established by the authorities, i.e. restricting the access to the asylum procedure only to a small number of applicants and only once a week, in a process that takes place before dawn, leaves room for the appearance of arbitrariness, violence and exploitation, towards which the police remain indifferent contrary to their role and in breach of their obligations."

So in a period of a week, the Greek police force stands accused by NGOs, coroners and UNHCR of mistreating anti-fascist protesters in custody, of "indifference" towards mistreatment of asylum seekers and of actual participation in racist attacks on migrants.

When I interviewed a Greek police spokesperson last week he was at pains to deny all allegations of mistreatment and racism.

We have requested an interview with Greek Public Order Minister Nikos Dendias but he has so far declined.

"There is already civil war," says Ilias Panagiotaros. If so, the shop he owns is set to do a roaring trade.

It sells camouflage gear, police riot gloves, face masks and T-shirts extolling football hooliganism.

On the walls are posters celebrating the last civil war in Greece, which ended in 1949.

"Greek society is ready - even though no-one likes this - to have a fight: a new type of civil war," he says.

"On the one side there will be nationalists like us, and Greeks who want our country to be as it used to be, and on the other side illegal immigrants, anarchists and all those who have destroyed Athens several times," he adds.

You hear comments like this a lot in Greece now but Ilias Panagiotaros is not some figure on the fringes: he is a member of the Greek parliament, one of 18 MPs elected for the far-right Golden Dawn in June's general election.

And for Mr Panagiotaros, civil war is not something theoretical.

Last week he led a demonstration that closed down a performance of the Terence McNally play, Corpus Christi.

As police stood by, apparently oblivious, Mr Panagiotaros was filmed shouting racist and homophobic insults at the director of the play, and the actors cowering inside the Chyterio Theatre.

"Wrap it up you little faggots. Yes, just keep staring at me you little hooker. Your time is up.

"You Albanian assholes," shouts Mr Panagiotaros in the YouTube clip.

Footage filmed inside the theatre, as rocks showered into its open-air auditorium, shows the manager making frantic calls to the chief of police, demanding protection from a mob that had begun to beat up journalists outside.

Other footage shows Golden Dawn MP Christos Pappas "de-arrest" a demonstrator, pulling him from a police detention coach, as the police do nothing.

Calls were made to the public order ministry, who ordered the chief prosecutor to attend the scene. No help arrived.

"This was the Greek Kristallnacht," says Laertis Vassiliou, the play's director.

"People went home with broken bones. Every day they phone me now, they phone the theatre, saying: your days are numbered."

His eyes redden and his face begins to tremble as he tells me:

"They phoned my mother, Golden Dawn. They said we will deliver your son's body to you in a box of little pieces.

"I want to be told if we are in a democracy or a dictatorship?"

The attack on Corpus Christi has become a signal moment for Greek politics.

Though Golden Dawn members have attacked migrants frequently, in the past month the far-right party has stepped up its presence on the streets.

It launched a raid on a street market in Rafina, where its uniformed activists demanded to see the permits of migrant stallholders there - demonstratively smashing up the property of those who did not have them.

Now, with the attack on a theatre group, alarm is spreading among sections of society that were not previously affected by the party's actions.

I ask Mr Panagiotaros: how can it be right for a party in parliament to have a uniformed militia that takes on, violently, the role of law enforcement, checking papers and overturning market stalls? He explains:

"With one incident, which was on camera, the problem was solved - in every open market all over Greece illegal immigrants disappeared.

"There was some pushing and some fighting - nothing extraordinary, nothing special.

"Now, only with one phone call saying Golden Dawn is going to pass by, the police is going there. That means the brand name of Golden Dawn is very effective."

He confirms the party's strategy is to force police action against migrants and to claim their right to make citizens' arrests against those they suspect of criminality.

"It's like fashion - our dress code is now extremely popular and more people want to follow it. The brand name is synonymous with order, law and order and efficiency."

And if it projects fear among perfectly legal migrants? I ask.

"There are no legal migrants in Greece," says Mr Panagiotaros "not even one."

Now Golden Dawn is suddenly everywhere. Its eight local offices at election time have become 60 nationwide. It is polling consistently as the third most popular party at 12%.

Its parliamentarians have threatened to "drag migrant children from the kindergartens," and requested a list of the kindergartens with high migrant numbers. This, the Greek education ministry has willingly provided.

Time and again there is a pattern to Golden Dawn disturbances.

They target migrants, the Left, lawyers representing migrants, or in the case of the theatre picket, gay people. And the police stand by.

In Athens police are even alleged to have referred people experiencing problems with migrant neighbours to Golden Dawn for help.

Mr Panagiotaros confirms what opinion polls taken in June indicated: there is support for Golden Dawn inside the police force, way higher than in the general population.

"I think with what they are saying now we have more than 50%, 60% of police staff that are following us - maybe more - every day it is growing," says Mr Panagiotaros.

Many of his customers are police, who buy not just their riot gear but parts of their actual uniform from his militaria store, where police regulation shirts hang alongside T-shirts praising the Nazi group Combat 18 and the Chelsea Headhunters.

Policing the Greek crisis would pose a huge challenge, even without the issue of political support for the far right inside the police force.

Anarchists have tried to counter Golden Dawn's patrols in migrant areas by staging their own, motorbike mounted patrols - hundreds strong.

During a motorbike protest last week, a clash with Golden Dawn occurred.

A unit of the motorbike-mounted police called Delta Force arrested 15 demonstrators, stripping them naked in the prison cells and, say the detainees, using tasers, stress positions, humiliation techniques and beatings.

A report of this in the Guardian last week has become a matter of national controversy here, and is strenuously denied by the government.

On 8 October a further 25 protesters were arrested at a demonstration at the courthouse to support those originally detained.

Yiannis, one of those detained, tells the story:

"They searched us, made us strip, kneel. They hit me on the head and knees. They said we know where you all live.

I meet Yiannis and Maria, two of those alleging mistreatment, in a quiet flat in Exarchia, the bohemian district of Athens.

Both will speak only on condition that I change their names, and film them without showing their faces. Though charged eventually with misdemeanours, they were both held for four nights in police custody.

Yiannis continues: "They said: You're finished and things are not going to be the way they were from now on.

"They said they would pass on the video they filmed of us to Golden Dawn. They picked on me to use as an example to the others. They kept making me say to every new detainee: 'if you too disobey they will [hurt] your mother'."

Maria, who has been calm and confident as we have prepared for the interview, now becomes disturbed as she tells her story.

"They made me strip in front of the others," she says.

"The Delta police arrived and spoke about Golden Dawn as if they were their siblings, including the officer in charge. They praised Hitler, saying he was better than Stalin.

"They told us we should remember this - that they are Golden Dawn supporters now."

Throughout the ordeal, the arresting officers from the Delta Force, says Maria, continually flaunted their political support for Golden Dawn.

I put the allegations to Lt Col Christos Manouras, the spokesman for the Athens police. He tells me:

"I am categoric that in this incident none of these things happened in the headquarters building of the Attica police. Greek police respect human rights - and this is a non-story."

He adds: "These allegations were never made to the police. No charges were pressed, so the police could look into this from the beginning.

"All the same, if anybody wants to identify themselves - or even if a general allegation reaches us - we will investigate it further. If it involves police, whether racist violence or violence against another person, Greek or migrant, we investigate in depth."

Dimitris Psaras, whose new book, Golden Dawn's Black Bible, details the organisation's recent rise, believes the influence of far right within the police force works at an insidious level:

"There is an osmosis of Golden Dawn supporters, between those working in the police and those in private security as well as those providing night club protection.

"Sometimes the same person can be providing all these three services. They usually meet in local gyms and specific coffee shops owned by those who share the same ideology."

Mr Psaras believes that harsh police treatment of drug offenders and migrants gives a tacit signal to Golden Dawn that its illegal attacks on these groups are welcome.

I repeatedly put the question to Lt Col Manouras as to what strategy the police commanders have adopted to mitigate the risks of individual police support for Golden Dawn compromising operations.

"Every day we make operational plans of how to deal with such phenomena," he says.

"Rest assured we stand by the citizens and we try to prevent such situations.

"Of course we can't be on every corner. We are not magicians, to be able to ensure within two minutes that nothing goes wrong. But we do intervene immediately to normalize the situation."

Growing support

Golden Dawn has gained ground spectacularly in two leaps. First, during the riotous summer of 2011, when the right wing Christian nationalist party Laos disintegrated after it joined the pro-austerity coalition.

Laos vanished and Golden Dawn took its place, scoring 6-7% in the inconclusive Greek elections of May and June 2012.

The second spurt is occurring now, as the coalition government - which includes Conservatives, Socialists and the "moderate" Marxists of the Democratic Left party - has failed to put a lid on the crisis.

And the issue driving support for Golden Dawn is clear: illegal migration.

Faced with virtually uncontrollable borders, the coalition government launched a roundup of migrants from the city streets, and has detained around 4,000 in makeshift camps. A further 3,000 have been deported.

A senior lawmaker in the ruling New Democracy party told me, back in June: "What will solve the Golden Dawn problem is getting an immigration policy. We haven't had one."

But the crackdown on immigration has not stopped Golden Dawn's rise. As the media have joined in - relentlessly identifying foreigners with crime - the far right's poll rating has increased.

Theodora Oikonomides, a journalist at the alternative radio network RadioBubble, who has covered the rise of Golden Dawn, voices a fear common to many:

"Golden Dawn's favourite themes, such as xenophobia, homophobia and anti-Semitism have now become part of Greek public discourse, whether at the political or at the social level.

"By failing to take action against Golden Dawn while nodding and winking to its electorate at every opportunity, the Greek politicians - who are now in power with the support of European partners - have opened a Pandora's box that will not close any time soon."

Last month, the Greek prime minister, Antonis Samaras, warned Europe that his country was on the edge of a Weimar Germany-style social collapse.

What I have seen on the streets of Athens convinces me this is not rhetoric. The situation is changing rapidly.

There is a violent far-right party, its MPs committing and inciting violence with impunity; a police force that cannot or will not prevent Golden Dawn from projecting uniformed force on the streets. And a middle class that feels increasingly powerless to turn the situation round.

When Angela Merkel came here last week, there were violent scenes and a total lockdown of the city. Only from the TV news can the German Chancellor have witnessed the impact of the EU-imposed austerity.

Well here is what it looks like to Golden Dawn's second in command, Ilias Panagiotaros.

In the garden outside his shop, protected by 15-foot high fencing and beefy colleagues in their black T-shirts, he tells me:

"Golden Dawn is at war with the political system and those who represent it, with the domestic and international bankers, we are at war with these invaders - immigrants.

"And if Syriza wins the next election, we will win the one after that. It is not a dream that within one, two or three years we will be the first political party."

And here is how it looks to Laertis Vassiliou, the theatre director whose play was shut down:

"If the European Commissioner for Human Rights, the European Parliament, the Greek parliament don't intervene in this situation I am afraid to think what's going to happen. Europe must do something if they don't want a revival of the Third Reich again."

Close up, in other words, the social and political outcome of the IMF (International Monetary Fund) and EU (European Union) austerity programme, and of the implosion of mainstream politics in Greece, looks like a catastrophe for democracy.

Watch Paul Mason's full report on BBC's Newsnight on Wednesday 17 October 2012 at 2230 BST on BBC Two. Or catch up afterwards on BBC iPlayer.

Manuel Castells, one of the world's most cited sociologists, proclaimed the dawn of the "network society".

In pioneering quantitative research, he discovered that internet use and "projects of personal autonomy" fed off each other: that the internet, in other words, was changing our social attitudes and even our very selves.

For Radio 4's Analysis, on Monday night at 8.30pm, I quiz Professor Castells about his new book Aftermath - which looks at how the current financial crisis has produced networked protest movements, and even new "non-capitalist" forms of economic behaviour (the programme was recorded with a live audience at the London School of Economics last week).

"People have decided not to wait for the revolution to start living differently," he says. "We're seeing barter networks, social currencies, co-operatives. Networks of providing services for free to others in the expectation people will do the same for you. This new sector in the economy is expanding throughout the world."

Prof Castells conducted a large survey among people in Catalonia, Spain which found that 32% had lent money at zero interest rates to non-family members.

I tried this out on the 800-strong audience at the LSE - who were mostly students and young academics. On a rough tally, at least 20% had done so here.

Prof Castells believes this is not just an expansion of a kind of protest counterculture - what activists call "living despite capitalism":

"It's a combination of two things. A number of people have been doing this for quite a while already because they don't agree with the meaninglessness of their life. But now there is something else - it's the legion of consumers who cannot consume.

"And therefore since they don't consume - they don't have the money, they don't have the credit, they don't have anything, then they try at least to make sense of their lives doing something different."

Prof Castells, who himself has taken part in the Occupy movement in Barcelona, says:

"There is a crisis of trust in the two big powers of our world - the political system and the financial system. People don't trust where they put their money and they don't trust those they delegate in terms of their vote. All the statistics are there.

"It's a dramatic crisis of trust and if there is no trust, there is no society. It's simply institutions that still try to control citizens."

One of Prof Castells most famous phrases is that "society is defined by the bipolar relationship between the network and the self". I ask him to explain this:

"The more we are connected to everything and everybody and every activity, the more we need to know who we are. Unless I know who I am, I don't know where I am in the world, because then I am a consumer, I am taken by the market, I am taken by the media.

"And therefore people decide that they are going to be different. But to do that, they have to identify themselves as individuals, as collectives, as nations, as genders, all these categories that sociologists have already constructed time ago.

"With Facebook and with all these social networks what happened is that we live constantly networked. We live in a culture of not virtual reality, but real virtuality because our virtuality, meaning the internet networks, the images are a fundamental part of our reality. We cannot live outside this construction of ourselves in the networks of communication."

As to the future, Prof Castells says - neither the crisis nor the resistance it has summoned is over.

"Politicians and financial leaders keep saying 'the crisis is over, don't worry'. And it's not over and not over and we are already in the fourth year of this endless crisis; unemployment grows, social services are cut and it looks like the only solution to the crisis is to destroy the welfare state.

"The combination of this economic, social crisis and crisis of political legitimacy could provoke a joint backlash from the welfare state users, from the public sector unions, with all the new alternative movements in a very confused way and with simply individuals - people who want to take control of their lives."

From the man who knew what Facebook and Twitter would look like before they had been invented, that's some prediction.

Paul Mason will be in conversation with Manuel Castells on BBC Radio Four on Monday 15 October, at 2030 BST . The broadcast will be available on the BBC iPlayer or via the Analysis podcast .

The move came after IMF Chief Economist Olivier Blanchard admitted the Fund's calculations of the impact of austerity had been seriously wrong.

The Fund's World Economic Outlook, published on Monday, contained a serious revision of the way its experts calculate the so-called "fiscal multipliers".

They had assumed, as the British Treasury does, that each 1 euro of cuts and tax rises takes 50 cents off GDP growth. Now, because of the paralysed banking system and the co-ordinated nature of austerity, preventing countries from recovering through export markets, the Fund estimates the impact is between 0.9% and 1.7%.

This is quite a massive revision - and explains why the Fund has been continually unable to predict the outcome of austerity measures, and constantly disoriented by the capacity for developed economies to take a double dip.

The test bed for the Fund's new economics has to be Greece, where the government has been given until next Thursday to pass a new round of austerity measures. If it does not, the threat hangs over Greece that it will not receive 31bn euros in bailout money and, by the end of November, go bust.

Meanwhile as BBC's Newsnight reported on Tuesday, there are severe strains showing in Greek democracy - evidence of police inaction during fascist raids on immigrant communities, allegations of human rights violations against protesters in custody, and concerns raised by Amnesty International.

Vicky Pryce, whose book "Greekonomics" surveys the political disorientation that has brought Europe to the brink of depression, told Newsnight:

"The only thing that could lead to Greece leaving the euro is if it ceases to be a democracy - and I predict that unless the rest of Europe comes to its aid, that is what will happen."

Mme Lagarde has called for Greece to be given two extra years to meet its deficit reduction targets. Whether the rule of law and social cohesion can last two years is now a matter of serious concern.

For now the kit-built replica planes zoom acrobatically across the beach in Barcelona, the crowd's "oohs and ahhs" moderated by that essential Catalan characteristic: cool.

They shelter under umbrellas to avoid getting tanned. And they chat. And what they chat about is beginning to cause a quiet terror in Madrid, and in Brussels. Leaving Spain.

"My feeling is that the Spanish government has totally rejected what is happening here," says Jorge Fernandez, who has come here to watch the show. "They have spread rejection and hate with comments calling us 'the damn Catalans that don't want to collaborate'."

Another spectator, Eduard Castells, says: "The situation has evidently changed a lot. It's no longer about what people are feeling in their hearts, it's what they feel in their pockets too. And the feeling is that they would be a lot better off if they were not a part of Spain."

Three weeks ago one and a half million Catalans went on the streets, with outright demands for independence much higher in the mix than ever.

When the government in Madrid refused the region's demand for a new fiscal settlement, allowing it to keep more of the tax it raises, its government, led by the Convergence and Union (CiU) parties, called snap elections.

They want a referendum on Catalonia's future: through legal means or otherwise.

Oriol Pujol, the general secretary of Convergence, tells me: "We have an enormous fiscal transfer to Spain - about 8% or 9% of GDP - and never returns, year after year. And we could agree to carry on with that: there's no problem with agreeing to show solidarity with the rest of Spain. But when we have to make double cuts in services, when taxes are double - we have to make a change."

But he is keen to stress this is not just the result of the economic problems that have seen the region demand a 5bn euro bailout from Madrid:

"One cause of it is the crisis, but the crisis just gave the last push. It's the addition of obstacles, one on top of the other by Madrid, over the past two years. Political obstacles - and obstacles to identity, which really says to us there is no option to have Catalonia as we imagine it inside the Spanish state."

If, as expected the CiU wins the regional election on 25 November, then the clash over a referendum could crucially affect the course of the coming sovereign bailout for Spain.

"If we exhaust all legal routes to get a referendum we won't stop," says Mr Pujol.

I ask him, point blank if the region will call a referendum in defiance of the national courts and constitution.

"There will be no way to avoid it. If we don't deliver it someone else will. More radical parties. But in a negotiation," he smiles, "it's not the best thing to reveal what you are going to do next."

Bond markets, which have for 12 months tried to price the risk of a eurozone breakup, now have to calculate the possibility of the breakup of the Spanish state - for secession in Barcelona would surely prompt centrifugal tendencies in the Basque region, and exacerbate the fiscal crisis in the poorest regions.

Mr Pujol says that an independent Catalonia - often called the "Germany of Spain", for its high GDP and industrial base - could play a role in turning around the image north Europe has of southern Europe.

But the rise of Catalan nationalism is provoking tension in Spain itself. When I vox-popped villagers in neighbouring Valencia this week, about the impact of the crisis there, talk turned among the oldsters, who had lived through the Civil War, to "the Catalans" - the word is almost spat.

"It's outrageous!" one elderly lady smacked her fist into her palm. "We'll never let them leave!'

Last week a serving officer in the Spanish army, Colonel Francisco Aleman, upped the stakes, telling a website "Catalan independence? Over my dead body and that of many soldiers". Adding that the crisis was already "like 1936" - the year the Civil War began - "only without the blood".

Mr Pujol smiles painfully when I put this to him. It's not exactly laughable he says; it has to be taken seriously:

"There are no other options than democratic answers - knowing the whole EU and international community are observing what Spain answers. It's not the moment: we passed that some years ago."

"The politics of fear, not only the comment of this person from the army, will appear: we know that. But the process is so driven by enthusiasm that we think such comments show how weak Spain is faced with the process in Catalonia."

If they ever do become a country, they will of course have no trouble fielding a football team. At Barcelona fans' bar, the supporters watching their team trounce Benfica are adamant, the region will leave Spain:

"Two or three years ago people would tell you 'hey, that independence thing will never happen, don't get too excited about it and don't expect too much'. And now, after what has happened in the month and a half it is amazing."

"I feel Catalan," insists another. "My passport and ID card say I'm Spanish, but I just don't feel Spanish."

And here is the problem. You can dispute the economic costs of Catalan independence, but at least you can measure it with facts and figures. What you cannot measure is feeling: and there's a huge wave of national sentiment in Catalonia, sparked by the austerity, but drawing above all on anger at Madrid's perceived power grab.

"For the past 10 years Spain constructed its relationship with Catalonia on the separation of powers," Raul Ramos, an economics professor at Barcelona University, tells me"; "economic power in Barcelona, political power in Madrid. But now, to impose the bailout conditions, Madrid has to concentrate economic power in the centre. That's what's driven Catalan politicians to act."

Two years ago, when I put footage of a million strong Catalan demonstration into a report about the economic crisis, I had tweets back saying "the two aren't linked".

For years the threat of Catalan recession has been rhetorical; always producing a fiscal compromise with Madrid. But now Madrid has nothing left to offer.

Under Franco people died for the right to speak their own language, sing their own folk songs, dance the Sardana in the shade of the old cathedral. And in the years after, this cultural freedom has been enough to contain demands for independence.

But the crisis changes everything. And we still don't know where the crisis ends.

It's a view. Quite strongly held not just on the right in Spain but on the centre left. However Alaman is a serving soldier: a colonel. And it wasn't the only incendiary thing he said.

In the week tens of thousands of protesters surrounded parliament, he told the website Alerta Digital:

"The current situation is very similar to 1936, but without blood. Unfortunately, the data indicate that the situation will only get worse in the coming months and years."

Economics journalists have learned, (thanks to the work of the FT's Gillian Tett), to ask a very brutal and searching question as we parachute into the latest theatre of crisis: look for the social silence. What is staring you in the face but nobody wants to talk about it?

Well Colonel Alaman has answered it.

During the early years of Spanish democracy, forgetting about the Civil War (1936-39) was not just a psychological necessity - it was a political choice.

The "pact of silence" instituted after the fall of General Franco was seen as a price worth paying for rapid, peaceful transition to a functioning democracy - a democracy that, moreover, found space to accommodate a strong, previously clandestine Communist Party alongside the rapidly moderating socialists of the PSOE (Spanish Socialist Workers' Party).

The approach was codified into law, with the 1977 Amnesty Law guaranteeing a blanket immunity from prosecution for those suspected of crimes against humanity during the Franco era and the Civil War.

With Spain now reeling from austerity, its riot police dispensing truncheon blows and rubber bullets against demonstrators and passers-by, the "pact of silence" is falling apart.

The images of violence - not all of them make it onto mainstream television, but the internet does the job - are forcing Spanish people to confront historical memory in a way the various campaigns and lawsuits about the Franco era have not.

For the austerity, and the protests, have summoned the spectre of a clash that defined Spain in the modern period - the clash between liberal modernity and religious, monarchic hierarchy.

This problem haunted the writing of the early modern poets and political theorists in Spain: "A dead, hollow, worm-eaten Spain and a new, eager, ambitious Spain that tends toward life," as the historian Santos Julia puts it.

It's clear now that these two cultures within Spain - as visceral and rooted as the "southern" and "liberal" cultures in the US, or the "intellectual Russia versus peasant Russia" problem - never went away.

But the culture war had seemed suppressed by wealth: the booming economy, the rapid liberalisation of society, and the massive investment in modern infrastructure allowed them to co-exist.

For 30 years after the fall of Franco it was a different Spain - a modernised economy, linked to the European core by its single currency and the Schengen agreement, and benefiting on top of that from its links to the rapidly expanding economies of Latin America.

When the economy took a nosedive, and the first austerity plans were launched, it was striking that the political and social settlement seemed actually to be helping mitigate the effects.

Despite the 50% youth joblessness figures, the family took the strain: people moved in with their parents, borrowed their grandmother's car; in small towns and villages, barter systems sprung up.

And as with high finance the illusion was that complexity reduces risk. The Spanish constitutional settlement, which makes Opus Dei and Pedro Almodovar films two of the country's best known cultural exports, was complex.

Spain's regional government system would also act as a shield to the needy: less than six months ago the Socialist/Left coalition government in Andalucia told me confidently it would soften the impact of austerity measures demanded by the centre. Now it is bust.

Now in rapid succession, numerous signifiers of political crisis have appeared: acute class divisions, regional politics, street violence, outright civil disobedience and un-addressed corruption; the removal of migrants' rights to free health care; the sight of uniformed firefighters clashing with riot cops, helmet to helmet, on the streets of Madrid.

With it, you get the resurgence of references to the bloody conflict in which the "two Spains" tried to kill each other.

To the right there are people like Col Alaman.

To the left you get the camisetta Republicana. It's a version of the Spanish soccer team's red and yellow strip with the addition of a big swathe of republican purple: the colours of the flag Franco tore down in 1936.

I first saw one of these in the village of Colmenar, 40km north of Malaga. When Mayor Sanchez Gordillo's roving protest march arrived in the town, I noticed people wearing this unusual football shirt.

The shirt was produced in 2011 as a limited edition for enthusiasts. Now you are beginning to see it a lot around protests.

Beneath this battle of signifiers there is a serious potential for fragmentation in Spain.

Last week the Catalan government called snap elections. The ruling party - the Convergence and Union party - contains a strong minority which advocates outright independence, though informed observers think its leader Artur Mas, will use the election result to extract maximum fiscal autonomy from Madrid.

The smaller far left in Catalonia also supports independence.

The move follows a demonstration that saw 1.5 million Catalans take to the streets, with many calling for the region to become the next country to join the European Union.

Analysts are split over the significance of the Catalan move.

As the second richest region, with a GDP of 220bn euros a year, it has always been seen as an empty threat to go for full independence, the cynics saying Catalan flirtation with slogans around secession are mere posturing to gain a better fiscal settlement with Madrid.

Others on the ground are saying "this time they mean it".

Either way, the Catalan gambit has triggered responses in Madrid that have shocked a generation lulled by the "pact of silence".

There is Colonel Alaman, threatening to defend "the non-negotiable principle of Spain's unity…even with our lives."

Next, the AME, an association of retired military personnel, which insisted that "any flicker of secession to be suppressed": those calling for it "will have to respond with all rigour to the grave accusation of high treason under the jurisdiction of military tribunals".

Before the Madrid government has to deal with Catalonia, however, it also has to face two regional elections: in Galicia, which the ruling PP also runs and should hold, and the Basque region - where it is getting complicated.

The Basque Country has traditionally been run by the Basque Nationalist party - a centre right party.

At the last election the socialists won, but in the past year left nationalist forces have managed to form a very effective electoral bloc called Euskal Herria Bildu.

Bildu, for short, is led by figures formerly associated with Herri Batasuna, the political wing of ETA (making it something like a cross between Sinn Fein and the Greek Syriza party).

It currently is running neck and neck with the right wing nationalists and could win - precipitating a constitutional crisis with Bilbao that then sets the scene for one with Barcelona.

Before the austerity hit there were a whole series of unthinkables in Spain: that the Civil War divisions, of right and left, could ever be reopened; that the military could ever again intervene into politics (the last time, the Tejero coup of 1981 descended into high farce); that the modernization and growth that Spain enjoyed could ever be reversed; that the federal state could never shatter.

But numerous unthinkables have already begun to happen: the effervescent lifestyle associated with the Spanish miracle has dissipated.

Millions of super-cool Spanish youths, who were supposed to be "apolitical" took to the streets in May 2011 in a protest that invented the Occupy tactic. The banks are bust. And the Partido Popular - which always resisted a bailout - is being forced to take one.

Mariano Rajoy's government is now committed to in excess of 90bn euros of austerity in the next two years.

It will work only if the economy shrinks by a relatively meagre 0.5% next year: most commentators believe the shrinkage will be triple that.

And it is a budget that, whatever the best intentions of its designers, hits the poorest in Spain hardest: it hits public sector workers, all wage earners, and only avoids hitting pensioners by dipping into a contingency fund that is supposed to cushion them.

Wherever you go in Spain - from angry Barcelona to angry Bilbao to angry Andalucia, Valencia, the seething estates at the edges of Madrid - you hear outrage at what is seen as economic injustice: hitting the incomes and services of the poorest while bailing out the banks that had become political playthings for the elite.

The unrest of this month certainly moved the markets: bond investors are split, now, between those most worried about the sovereign debt crisis and those trying to price in the risk of state break up or violent unrest.

"These are risks we're used to pricing in the emerging world," bond analyst Nicolas Spiro told me last week; "but not in the developed world."

The crisis has got some commentators asking, is Spain slipping the way of Greece?

But, having reported both situations, I think this is the wrong question.

In Greece the Civil War happened a decade later than Spain and though vicious, took place as part of the onset of the Cold War.

The "story" of the civil war sits alongside the story of Communist-led resistance to Nazism; and the "percentages agreement" between Churchill and Stalin, which placed Greece in the Western camp.

In Greece the Civil War is openly talked about.

In some villages it is still common for the different parties - and by implication the competing survivors from the conflict - to sit in separate kafeneions.

Conversations among those who survived the conflict often drift towards it, as if it were yesterday. And there has been no formal pact of forgetting.

The fact that Greeks overthrew the colonels' regime in 1974 (and staged a "Greek Nuremberg" for the deposed officers) allows Greek people to calibrate modern rightism and leftism against some level of historical accounting.

Contrast this to Spain.

In the Spanish Civil War, the people of Spain were abandoned to a fascist coup by democratic countries more worried about communism than fascism. The British navy famously stood by while Franco's navy sank British merchant ships, while Hitler's Condor Legion bombed Guernica.

Consequent on Spain's neutrality in World War II, Franco was tolerated within the post-war order. And once he died, a managed transition to democracy occurred which left the perpetrators of torture, massacre and more unpunished.

All these factors allowed the events of the Civil War itself to be officially forgotten: there is, even now, no official record of the atrocities.

The relevance to today is this: the peaceful transition created a new political system in which the old elite populated both sides of the political spectrum - but without any formal accounting of the events during fascism.

Today it is hard not to see that as one of the roots of the corruption that, as right wing daily ABC said two years ago "is drowning Spain".

It is facile to search for "national" sources of corruption: corruption happens in a market economy everywhere it is allowed to.

It's been rife, as we now know, in the London and New York financial systems; it was present in the German car industry; it is present across the Italian system of government.

However in Spain the post-Franco settlement gave corruption a particular form.

There is heavy and open nepotism in the appointment of business executives; there is - say foreign business people - an unstated regulatory bias in favour of Spanish-owned large companies.

And there has been mismanagement of resources, leading to the wasteful spending and lax planning that has left numerous Spanish regions with white elephant projects and tens of thousands of unsellable homes, with local banks driven to insolvency as it all went bad.

The 60bn euros bailout of the banks currently underway under-estimates the economic price of such mismanagement considerably.

If Spain is not yet Greece in the intensity of street conflict, and the collapse of old party loyalties, there are other indices on which it is has to cause concern: the potential for a showdown between Madrid and Catalonia is one; the potential for a clash with a government led by left-nationalists in Bilbao is another; the rise of high-profile civil disobedience campaigns such as that launched by Sanchez Gordillo in Andalucia.

And the long-standing cultural and political tendency for movements to bypass official power and set up alternative power structures of their own.

The Greek left was always communist - ie hierarchical: it is even now - in the opposition parties Syriza and the KKE, (and the Democratic Left inside the ruling coalition), shaped by Marxism.

By contrast Spanish radical movements were heavily shaped by anarchism and anti-clericalism: you can see this even in the current movement of the jornaleros - farm workers - in Andalucia, whose distrust of the main socialist party the PSOE goes back, not to last year, but as one told me, "to 1931".

The problem is not that Spain is a "young democracy": young democracies can be vigorous, culturally revolutionary, fun places to be.

No, the problem is that, as Spanish people gaze at TV images of metre-long truncheons being wielded against passers-by in a Metro station, the discourse tends to head straight to where, for 30 years, they have avoided it heading.

In his interview with Alerta Digital, Colonel Alaman gave a very clear example of this. Asked whether the Catalans are "inevitably" nationalist, Col Alaman said:

"I rebel against the claim that the Catalans have always been nationalists... The Catalan volunteers who made war on the [Francoist] side were far superior in number to those who defended the republic. The Blue Division [a Spanish unit in the Wehrmacht] had nearly 500 volunteers from the region…"

When the reference point for the Catalans' alleged "non-nationalism" becomes their preparedness to fight for Nazi Germany and General Franco, you know the "pact of silence" is not really working.

Spain has the power to explode in a way that Greece does not.

It is a major global economy. Its hitherto strong post-fascist political settlement is rapidly weakening. Its survival as a federal state is under threat.

And there is a perception factor. The Greek political class knows it has messed up; it is never surprised to see negative GDP projections surpassed on the downside; it is reconciled to the emergence of radical parties of the left and right and knows the parties of the centre will have to be reinvented.

But in my numerous contacts with Spanish politicians and economists during this crisis there has been an insistence - which crosses party boundaries - that "everything is alright": Spain is really a strong economy, the white elephant projects are really "infrastructure" which will prove a good investment in the end.

The deficit reduction plan will work. On good days they wake up and convince themselves there will not even need to be formal conditions set in Brussels, Frankfurt and Washington DC.

Is it facile, dangerous even, for foreign journalists to raise this problem of historical memory and immature democracy?

When I've raised it with Spanish politicians I've sometimes felt that it is about as welcome as "mentioning the War" in Fawlty Towers.

However, Col Alaman has mentioned it.

So have the protesters, who continually designate the European Union now a "Fourth Reich".

And we are approaching a crunch point. After five years of property bust, and a year of abject downturn, the Spanish economy is about to be hit by an almighty shock: austerity.

It might work, and it might not.

Right now Mariano Rajoy's government is running Spain as if it is inevitable that the medicine will work; that a Greek-style implosion, with the implosion of mainstream parties and the collapse of social order, is impossible.

For the past six months in the euro crisis I have said: "Spain is the unexploded bomb, Greece the detonator."

You need to move the bomb and the detonator away from each other as far as possible in time and space, so that when Greece "goes off", it will not take down Italy and Spain with it.

Mario Draghi's 6 September bailout proposal - the OMT - is designed to do just that.

Many EU politicians would be at best agnostic about Greek exit from the euro once Spain is stabilised.

But what the politics of protest do, and the politics of regionalism and nationalism accentuate, is to create unpredictability in Spain itself. The danger is that - as Rajoy prevaricates over bailout, and the political temperature crisis - Spain becomes both the bomb and the detonator.

Defusing it is still possible. But we've had a sense last week of what the explosion would look like.

You always know if an interview is going to be fun if the interviewee has a sharp, diagonal fringe.

Paula, the pharmacist, has such a fringe, and a grin that suggests she not only understands English but could crack a few jokes in it. But she chooses to speak in Spanish. Because what is happening in Valencia is no fun.

The sign on the wall tells the story. "Important information. The government of Valencia owe this pharmacy for all the medicine we have dispensed to you in January, February, March, April and May".

And not just this pharmacy. The government of Valencia - which runs the health system - owes a grand total of half a billion euros to the region's pharmacies.

Paula guides me into that back room that exists in all pharmacies, where the prescription drugs are kept. The problem is, now, there are not many drugs left.

"Look, this drawer is usually full," she says, pointing to where the suppositories are kept. Now there are only two packets."

She opens the fridge. "Look," she says, "we are down to our last packs of insulin. We just have no money to buy the stock."

I ask: "What happens if several people come in on the same day for insulin?" She makes two fingers walk along the back of her wrist. "They have to go around the neighbourhood to see if anybody else has it. It is the same with drugs for heart disease, stroke, anti-retrovirals."

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It is an ordinary pharmacy: clean, white, with the regulation green neon cross outside. Now quite a lot of the patients are having to do something which for them is extraordinary: they are having to pay - a bit - for their medicines. There is a sign on the door explaining the new charges.

The Spanish regions have an extraordinary problem. During the property boom which has now busted Spain, they were collecting some taxes - from, yes, property.

Now that source of revenue is gone, they are expecting the central government to provide them with the cash they need. But the central government is in trouble too: it cannot borrow - except at punitive rates.

The regions cannot borrow either. Valencia's deep in debt and who does pharmacist Paula blame? She smiles bitterly. "That is a very hard question to answer," she says.

In the baking heat outside Valencia's cathedral, there are people who do not find that question hard at all. They are holding up a banner: "The Route of Waste".

Journalists sacked when a local paper closed have taken to doing "citizen journalism" - which today means organising a coach trip around all the various projects Valencia built in the good times.

There is the Formula One racetrack, which runs right through the city so the roads had to be redesigned. But the city has lost its Formula One race.

There is the America's Cup dock, with huge sheds for ocean-going yachts and a massive white control tower. But there is no more America's Cup racing in Valencia.

There is the Opera House, a cross between the one in Sydney and something you would imagine only in your more disturbed dreams - 400 million euros to build, 40 million a year to run - 15 performances a year.

"Yes I am proud of it," says Xabi, one of the tour guides. "Yes the architecture is spectacular. But I would rather have schools."

Whether by corruption - and there has been a great deal of that - maladministration, or pure bad luck, Valencia is littered with vanity projects that tell their own story.

The airport that has never seen a single plane land. The theme park built in a place where the summer heat rises above 40C (104F). The land bought at premium prices that is now worthless.

The local press were also on the coach trip. And the next day I find out what they were working on. Headlines about me! They say the BBC's "star economics expert" - thanks for the compliment, guys - has come to Valencia to (here is the subtext) pour scorn on their wonderful infrastructure projects. The story makes the regional daily and the national conservative daily ABC.

And not only that. There are now angry demands in the official weekly press conference of the government: Why are the BBC here? Have you given them an interview? Will you give us an interview about what you told them in their interview?

"It is Spain," sighs the financial controller of Valencia.

Yes, Spain - where the arrival of the foreign media is a juicy story for the local papers but where massive white elephant projects went unquestioned for a decade, and where the banks that funded them, boards stuffed with appointed politicians, have now gone bust. And where if you need some insulin from the health service, you had better hope you are the first in the queue.

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On 6 September 2012 he delivered on that pledge: the ECB finally agreed to buy up the debts of countries in danger of default and hold them.