After five years of living on the brink, Greeks have become inured to make-or-break crisis meetings in Brussels. Wrangling over the details of austerity plans is no longer enough to push irate demonstrators on to the streets of Athens in protest – even if the leftist-led government has done little else since it was catapulted into power three weeks ago.

Instead, the Greek capital’s boulevards were buzzing all through last week. On Sunday, as Syriza’s outspoken finance minister, Yanis Varoufakis, prepared to confront his eurozone paymasters for the first time, thousands thronged central Syntagma Square imploring the European Commission, the European Central Bank and the International Monetary Fund – the bodies that have kept their bankrupt nation afloat – to “give Greece a chance”.

In place of the violence and tear gas of recent years were slogans of support for a government now popularly seen as putting up a robust defence of the country’s interests.

But the performance of Syriza’s ministers during the ensuing chaotic week of negotiations, with leaked documents, last-ditch compromises and accusations traded between European capitals, was less sure-footed than supporters back home might have hoped. The week ended with Yanis Varoufakis, the Greek finance minister, abandoning his defiant stance to reach a compromise deal on Friday night that agreed to extend the very bailout Syriza had vowed to repeal.

The drama began on Monday when eurozone ministers convened in Brussels for their second Greek crisis meeting in less than a week. Officials were braced for marathon talks stretching into the small hours, but in the end didn’t even need to bring in the usual supper of cold cuts. The mood was already bad, after Germany’s finance minister, Wolfgang Schäuble, said on the morning of the talks that he felt “sorry for the Greeks”, saddled as they were with an “irresponsible” government.

Wolfgang Schäuble said last week he felt sorry for the Greeks. Photograph: /Wiktor Dabkowski/dpa/Corbis

The mood worsened when the head of the eurogroup of finance ministers, Jeroen Dijsselbloem, presented the Greeks with a proposal to extend their EU credit line as long as they stuck to the bailout programme – the cuts and reforms Syriza was elected to roll back. The Greeks flatly refused, announcing their rejection to the media before the meeting started. Ministerial aides inside the room learned of this first from their Twitter feeds; the talks broke up after less than two hours.

It was not just a clash of ideologies, but a clash of styles, too. Attending Monday’s meeting in an untucked shirt and no tie, Varoufakis, a radical economist and self-declared “erratic Marxist”, stood out among the sombre suits and ties. His megaphone diplomacy irritated other ministers, and many objected to his market-spooking talk of financial Armageddon. After the meeting, Varoufakis accused Dijsselbloem of blocking a compromise plan.

Back in Athens, feelings of national pride were almost palpable. Instead of insipidly toeing the line, many said, the austerity-whipped country was finally standing up to Europe’s paymaster and telling it a few home truths.

“I am very happy,” said Spyros Mercouris, a leading voice on Greece’s arts and culture scene. “What this government is doing is restoring a sense of dignity to Greeks and giving Europe an important lesson in appreciating the differences between its various peoples,” he told the Observer. “I didn’t vote for either party [in prime minister Alexis Tsipras’s coalition] but I have to say that for the first time we are seeing dialogue, an exchange of opinions – and it is giving us hope.”

But despite the fighting talk, a rethink was under way. By Tuesday, officials in Athens had decided it was time to make concessions. With an application to the eurozone for further loans being drawn up, Varoufakis took an evening off and went to the Greek National Theatre to see Happy Days, Samuel Beckett’s surreal drama about an eternal optimist sinking into an inescapable sandy mire. Avoiding any laboured parallels, the finance minister told his 285,000 Twitter followers that it “was such a relief from you know what”.

The mood in Athens is upbeat, but how long will the bravado last? Photograph: YANNIS BEHRAKIS/REUTERS

The theatre of the absurd was perhaps not bad preparation for the following days. On Thursday, Greece swallowed its pride and offered a host of concessions to its eurozone creditors, crucially agreeing to submit to the economic supervision of the hated troika – the trio of international institutions that has overseen Greece’s €240bn bailout.

Officials in Brussels welcomed the Greek plan. City analysts declared that Athens had made serious concessions.

Then Germany said no. In a leaked letter, the German finance ministry accused the Greeks of proffering a Trojan horse, a plan to get a short-term bridging loan without austerity. It was unacceptable, Schäuble said.

But Schäuble does not have the final veto: that belongs to his boss, Angela Merkel. In 2012, the German chancellor decided Greece must stay in the euro to preserve the single currency. On Thursday night she spoke to the prime minister Tsipras for almost an hour, in talks the Greeks described as conciliatory.

Finland’s finance minister, Antti Rinne, said she saw “a spark of hope” that an understanding could be reached – though her Maltese counterpart, Edward Scicluna, brandishing the stick instead of the carrot, said a German-led bloc would be willing to see Greece crash out of the single currency. “I think they’ve now reached a point where they will tell Greece, ‘If you really want to leave, leave’,” he said.

“Greece has always managed to hold its head high. I think people will respect us, and fear us a little, after this.” Anna Lambrinou, 76

Despite the brinkmanship in Brussels, 1,300 miles away in Athens on Friday, under gloriously sunny skies, locals were crowding into cafes seemingly more euphoric than worried. Children dressed in carnival costumes highlighted the sense that life was going on as it always had.

“Greece has always managed to hold its head high. We are a proud people,” said Anna Lambrinou, 76, who said she had seen much worse in her lifetime. “Without meaning to sound arrogant I think they will respect us, and fear us a little after this.”

But Greeks are clearly also suffering and to some extent have got good at hiding their fears. Local banks have experienced mini-runs as anxious investors raid their accounts – even if the outflows are nowhere near the levels seen at the height of the crisis in mid-2012.

Bank cashiers say growing numbers have resorted to bringing in foreign coins and notes in the hope that they can exchange them for euros. “A lot of people who have family in the merchant navy are suddenly bringing in foreign currency in the hope that it is worth something,” said bank employee Giorgos Papadakis. “More than 50% of our clients have less than €10 in their accounts. There are some who come in every day asking if this or that deposit has been made. It’s never been as bad as this.”

By Friday night, Greek bravado had evaporated in Brussels too. An outline deal to extend the bailout by four months was agreed, but only after Syriza had given considerable ground. Varoufakis and his team will have a tough time explaining, when they return home, how an extension with conditions stringent enough to satisfy chancellor Merkel differs from the much-reviled bailout they were elected to repudiate.

Even if the details of proposed reforms that the Greeks must now submit to secure the deal are agreed by the end of Monday, the country has only staved off an imminent cash crisis; and it has been forced to renegotiate an austerity programme that has already imposed crushing hardship on its people. The crowds on the streets of Athens may find their endurance, and their trust, being tested yet again.