Sofka Zinovieff: Misunderstood and insulted, we are left with the taste of bitter oranges

In recent weeks, friends in Athens have been greeting me with dazed expressions: "How could this have happened? What went wrong?" When I switched on the radio this morning, the reporter was talking of "a third world war", only this time it's an economic one and we're at the centre, being kicked around by everyone else.

The number of empty shops is increasing each week. "To Let" signs are up everywhere and trade is reported down about a third by small businesses. Even neighbourhood tavernas, with their good, cheap cooking, testify that customers now limit themselves to one weekly outing – usually the classic Sunday lunch. The popular image of the Greek who drinks, dances and spends unwisely but generously on his friends is evaporating faster than you can say "Zorba". Apparently, even the numerous foreign beggars in Athens are leaving.

When I first stayed in Greece in the late 1980s, as an anthropology research student, it felt like a very different country. It was more remote, more "exotic" for the northern visitor, much poorer, and people talked of "going to Europe". The intervening years have brought enormous changes, and when I returned to live in Athens nine years ago (having acquired a Greek husband and two daughters), they were well under way. Greeks are not only wealthier, they have far higher expectations of life.

During this short period, Greeks moved from the periphery to the centre, becoming part of the "European family". The nouveaux riches have expanded along with the Athenian suburbs containing their brand new villas, and there are still the super-rich ship owners, who always kept their money well away from the mother country. Nevertheless, the majority of middle-class families struggle in the pursuit of their aspirations. Greeks work among the longest hours of all Europeans and many have two or even three jobs in order to pay the bills.

Children's education is still given top priority, and the harsh reality of state schooling is that few avoid paying for private cramming at the frontistiria, which most secondary school pupils attend as a matter of course.

Now the bubble has burst, Greeks appear remarkably willing to contemplate the radical reforms proposed by the new socialist Pasok government. Prime Minister George Papandreou's main slogan to the nation is "Let's turn the crisis into an opportunity". Despite introducing the toughest austerity measures since democracy was restored after the junta in 1974, he is still comfortably ahead in opinion polls after seven months in office. Papandreou's call to break with the past and change a mentality associated with clientelist politics, tax evasion and murky business dealing has been welcomed by many. While there is anxiety that everything is changing, people recognise that this could be a good thing.

Corruption may exist at the highest levels, but it continues all the way down through society to the smallest transactions. I know people who think that the ubiquitous rousfetia (a Turkish word used to describe favours, particularly of a political variety) are helpful, even Christian acts of mutual aid, and that the fakelakia ("little envelopes" filled with cash) that are handed to doctors so they "take care of you" are a kind of insurance for the patient and a useful salary boost for the doctor.

But this mentality is changing. Until recently, few professionals offered receipts for their services and we all accepted that our plumbers, cleaners and lawyers would give us smaller bills in exchange for avoiding paying taxes themselves. Now, everyone is required to provide receipts for even the smallest financial exchange, to be kept as proof of spending in tax returns. The new rule has been taken up with alacrity and struggling citizens have enjoyed some Schadenfreude at the investigations into wealthy doctors in the fashionable Kolonaki district of Athens, after revelations that they were declaring annual incomes of under €10,000.

What is harder are the harsh cutbacks and salary reductions for many ordinary families, and particularly the 670,000 public employees (ranging from rubbish collectors to top ministry officials) who are in the front line. Protests have been common in recent months, as people vent their resentment and fear, though it should be added that taking to the streets is in the Greek DNA. The centre of Athens has been brought to a standstill at least twice a week by marches and strikers for as long as I've known it; recent gatherings are hardly the major uprising that some foreign journalists have reported. Criticism of Greece's behaviour in the world media has verged on the spiteful and even racist in recent months. Suggestions that the Acropolis or the nicer islands are sold off have not been taken kindly. In particular, the venom coming from Germany and certain financial publications has appalled Greeks.

Outsiders have a long history of criticising Greece, ever since the 18th-century Grand Tour travellers' supposed philhellenism was dampened by disappointment that the modern Greeks did not match up to their ancient forebears. Greeks have countered this with a sense of themselves as the vulnerable David, oppressed by a series of external Goliaths (from the Ottoman Turks, through the Nazi occupation and US support of the Colonels' dictatorship of 1967-74).

Now there are the men in suits from the IMF, who are looking for radical solutions, but who may not understand Greece's subtleties. Stelios Kouloglou, a well-known journalist and film-maker, told me: "It is obvious that the patient is seriously ill. Greece requires an operation and chemotherapy. But you need hope that this will bring a cure. Otherwise how can you find the courage to go ahead?"

Greeks are upset and angry about their humiliating predicament. They blame a number of people and institutions: the state (viewed as implicitly untrustworthy since it was founded in 1832); politicians (especially the previous conservative government, which promised much and lied more); the international market investors who are poised to make a killing if Greece goes under; the EU (didn't anyone in Brussels notice what was going on in Greece over all those years?); and the wealthy Greeks who have been bailed out (one famously patriotic, left-wing singer recently took all his investments and savings abroad). But above all, Greeks blame themselves.

"The party's over," said Katerina Bakoyianni, an Athenian journalist. "We're angry with ourselves for what has happened." But it is not like Greeks to give up. "I don't know why, but historically, at times of crisis, Greeks come together. You can see it in our past, like during the German occupation. Maybe it can happen again." Athenians may be walking around in a state of shock, but it is in streets filled with spring sunshine and scented with blossom from the bitter orange trees. The pavement cafés are still packed with people sipping cappuccinos, even if many are asking painful questions about whether this end can also bring a new beginning.

Sofka Zinovieff is the author of Eurydice Street: A Place in Athens, published by Granta