Greece had just begun finding its new place in the world.
The Athens Stock Exchange was skyrocketing, the swollen public sector was shrinking, and the government was making strides toward membership in the European Monetary Union (EMU).
Even its foreign policy was winning fans in Western capitals, a change from the days of Socialist Prime Minister Andreas Papandreou.
Then came Abdullah Ocalan. Turkey's capture of the Kurdish rebel leader last week in Nairobi, Kenya, where Mr. Ocalan had been sheltering in the Greek Embassy, has left the Greek government open to accusations from abroad that it supports terrorists.
It has also led to charges at home that it proved incompetent in managing affairs of state, and a general uncertainty about its ability to continue broad economic reforms that will open the door to an elite club of European countries using the euro next year.
It may also imperil the government of Prime Minister Costas Simitis. Mr. Simitis's ultimate goal of joining the EMU has set him on a collision course with entrenched labor unions. Known here as a pragmatic technocrat who avoids the excesses of the late Mr. Papandreou - but who also lacks his charisma - Simitis's left-wing PASOK party had already been lagging in polls behind the opposition party, New Democracy.
Now, even after Simitis fired three key Cabinet ministers last Thursday in attempt to atone for the Ocalan scandal, the matter has deepened a fissure in his own party between his reformist wing and the more hard-core Socialist Left. There had already been talk that his party could lose this June's elections for the European Parliament, and growing expectations that a rival to Simitis may emerge at a party congress next month. Analysts now estimate that Simitis could be forced to face early elections, which were not scheduled to be held until September 2000.
"I thought he was going to survive until yesterday," says Angelos Stangos, the editor of Vima, the largest Sunday paper, speaking in an interview last Thursday, when the extent of Greece's involvement in harboring Ocalan became clear.
Stangos, who is known to be close to Simitis, says Greeks are so deeply disturbed by the mishap because it casts skepticism on the country's attempts to reposition itself as a well-managed European democracy.
"This is proof that the state machine doesn't work. They let people who don't have any official position deal with hugely sensitive matters. That's a free-for-all," Stangos says, referring to pro-Kurdish Greeks who smuggled Ocalan into Greece on their own accord, and then prodded the government to find him a haven. "There no discipline, no hierarchy at all, and people are still carrying the mentality of the village."
In reality, Simitis can tout many successes since he began his reform plan to overhaul Greece's position as the poorest EU member and its only country whose economy couldn't match standards for using the new euro.
Inflation, which soared to around 20 percent during the 1980s and early 1990s, has now been brought down to about 3.7 percent. State industries are being privatized, and wage increases have been severely curtailed.
But the rightist opposition says Simitis and his PASOK party have not moved quickly and deftly enough to privatize the economy and join the EMU.
"Just a few years ago, they were Socialists, and now they want to follow a liberal policy and at the same time, keep the same principals of the past," says Vassilios Maghinas, a leading parliamentarian for the New Democracy party. "They don't really believe in a free market economy - they're just acting on pressures to change."
In foreign affairs, the future looks even hazier. Simitis had been trying to reduce tensions with Turkey by moving Greek Cyprus not to deploy S-300 missiles on the island late last year. And he had ordered his secret services to have Ocalan removed from Greece out of concern that Turkey's knowledge of his presence here could lead to war.
But Turkey says Ocalan told his interrogators this week that Greece gave military aid to his Kurdistan Workers Party, or PKK, providing them with rockets and other ammunition.
Turkey's occupation of northern Cyprus, Turkey's new strategic alliance with Israel, and Turkey's incursions into northern Iraq in a new campaign against Kurdish rebels there have Greece fearing Turkey is becoming a regional bully.
"We believe that Turkey wants to change the status quo," says Deputy Defense Minister Apostolakis Dimitrios. "They don't recognize our borders and we consider it a threat to Greek sovereignty."
Greek military spending is already the highest in Europe as a percentage of gross domestic product.
Along with dread of Turkey capitalizing on Ocalan's capture at Greece's expense is some resentment of the US, Turkey's close ally and a key actor in securing Ocalan's capture. During the cold war, relations between the US and Greece were rocky when Premier Papandreou was friendly toward the Soviet Union and Libya. Though diplomatic relations have improved, trade is sparse and US investment in Greece is the lowest of any EU country.
"What we're trying to do here is to rebuild the US-Greece relationship, because it went through terribly difficult times in the 1970s and 80s," says Nicholas Burns, US ambassador to Greece. "In the '70s and '80s ... because of our support for the military dictatorship here between 1967 and 1974, anti-Americanism rose, and Papandreou government embarked on a Socialist economic philosophy which drove a lot of American companies out. And consequently, our economic relationship - as well as our political relationship - really plummeted."
In some ways, the relationship has yet to be fully repaired, and the full diplomatic fallout from Ocalan has yet to be seen.