The crackdown on the far-right party will undoubtedly release new tensions on to an already poisoned political scene

Before his untimely death at the age of 34, Pavlos Fyssas was a hip-hop rapper popular on Greece's anti-fascist scene but little known beyond the frontiers of that music genre or the borders of the country itself. On the night of 17 September all that changed.

After becoming embroiled in a row over a soccer game being shown at a cafe in a working-class Athenian suburb, Fyssas and his friends were set upon by thugs dressed in the combat pants and black T-shirts worn by supporters of the country's far-right Golden Dawn party.

Cornered by the mob, the bearded singer was soon lying in a pool of his own blood, with stab wounds to the heart and chest. Within minutes he had died. And within hours the killer, a self-professed member of Golden Dawn, had been arrested.

Murkiness may still surround the circumstances of the murder, but what Fyssas's death revealed, in sharp relief, was the depth of division within Greece. In an atmosphere made toxic by record levels of poverty, unemployment, desperation and despair, Greeks were soon describing the killing as a "political assassination" – the latest act in a string of attacks by a party bolstered by its seemingly runaway popularity in the polls.

Overnight, Fyssas had become a martyr – with the far-rightists deemed to have crossed a red line, despite Golden Dawn's vehement protestations that it had no connection with the crime. Thousands took to the streets.

"Until then we had managed to be civilised about the differences between the left and the right that have run through our country since the [1946-49] civil war," said the political commentator Giorgos Kyrtsos. "With Fyssas's assassination, that line was crossed."

After months of tolerating a group that had brutalised society – spawning a climate of fear among immigrants, attacking gays, holding "Greek only" food handouts and coarsening political exchange with rants about "subhuman foreigners" in the Athens parliament – Antonis Samaras's fragile coalition finally took action.

And, when it did, it acted with an alacrity and determination that few might have envisaged. In the space of 10 days, Golden Dawn branches across the nation were raided and searched, members were arrested, weapons confiscated and sympathetic police officers removed from posts. In the early hours of Saturday came the next step: the arrest of five of the organisation's senior members, including its rabble-rousing leader, Nikos Michaloliakos, and 14 prominent cadres.

All 19 were due to appear late on Saturday before a public magistrate on charges of forming a criminal gang.

Not since the return of democracy after the collapse of military rule in 1974 has a party been so publicly hounded. The arrests will undoubtedly unleash new tensions on to a political scene already poisoned by profound disillusionment with an establishment widely blamed for the financial mess that has lead to the nation's economic and social meltdown.

Adding to the crippling sense of uncertainty hanging over Greeks, Michaloliakos himself pledged that the campaign against his party would "open the gates of hell" before his arrest at his home early on Saturday. As Golden Dawn supporters gathered outside the gargantuan central police headquarters in Athens – blue and white Greek flags in hand underscoring their ultranationalist views – it remained unclear how the extremist organisation would react.

In recent months Europe had looked on horrified as the group, whose emblem resembles the swastika and whose politicians have openly applauded the policies of Adolf Hitler, has gone from strength to strength. Three years ago the far-rightists won only 0.72% of the vote. In elections last year that support increased tenfold with the party winning just under 7% of the vote and 18 deputies in the 300-seat parliament on the back of deep disgruntlement over sweeping austerity measures.

The government, which had come under increasing pressure to clamp down on an organisation now viewed as the continent's most violent political force, has won plaudits for the decisiveness with which it has ultimately cracked down on the group. Polls have shown a sudden drop in support for Golden Dawn, with conservatives who had migrated to the far right in disgust with Samaras's own centre-right New Democracy party returning to the fold.

But the far-rightists have also managed to retain their core support with successive polls this week showing that the party still remained Greece's third biggest political force. If need be, Michaloliakos and his cadres have vowed to fight their corner from inside prison cells.

Many have voiced concerns that the crackdown could backfire. The government is wading into uncharted waters, constitutionally, with experts emphasising the impossibility of outlawing a party catapulted into parliament by democratic means.

Even if its MPs are found to be guilty they will still retain their political identity. Greeks are still haunted by the memory of the KKE communist party being outlawed for almost 30 years after the civil war.

"It may have been more correct constitutionally to have sought parliament's approval to lift their political immunity first," said the constitutional law professor Kostas Chrysogonos.

In a rare display of consensus on both the left and right, politicians have attributed Golden Dawn's meteoric rise to the relentless, internationally mandated cutbacks Greeks have been subjected to since their debt-stricken country descended into crisis in late 2009. Far from having ideological appeal in a country that suffered one of the most brutal occupations between 1941-44 under Nazi rule, the far-rightists have managed to capitalise on the deep sense of injustice and fury that has increasingly radicalised society.

"Golden Dawn's respirator is the memorandum," said Takis Pavlopoulos, a senior policymaker in the radical-left main opposition Syriza party, referring to the loan accord Athens has signed up to with its "troika" of creditors at the EU, ECB and IMF. "Its base is not ideological but one of desperate people. Once you abolish the memorandum, the party will wither away."

Without Greece being cut some slack by its foreign lenders – not least Germany which has paid the lion's share of its €240bn in rescue loans since 2010 but has made austerity the price – many fear the party will resurface under another name if it is ultimately banned.

Hopes abound that by exposing the inner workings of a group that has operated as a paramilitary force but until now has been shrouded in mystery, Greeks will gradually turn their backs on Golden Dawn.

"We are not saying to all those people who voted for them that they are Nazis or fascists," said Notis Marias, a senior figure in the rightwing opposition Independent Greeks party. "What we are saying is that they made a mistake and this is the time to correct it."