As Andrea Vecchio heads down the corridor from his office in Palermo, two men parked behind a desk doing nothing leap to their feet to salute him. But Sicily's new assessor for infrastructure is not impressed. "Just look around," he exclaims. "No one here is doing any work at all."

Vecchio, a sprightly, grey-bearded entrepreneur and tough anti-mafia campaigner, has been drafted in to slice through Sicily's public-works red tape and tackle its idle hordes of civil servants, but even he may be too late to save the sun-drenched island's economy.

Long renowned for its sultry beauty and deadly mafia bosses, Sicily has now been dubbed "Italy's Greece", an island awash with misspent EU funds, state jobs traded for votes and a €5bn debt pile that some fear could push Italy's delicate economy into the abyss. Union and business leaders last week implored the Italian prime minister, Mario Monti, to take control of Sicily's disastrous local finances and, after credit rating agency Moody's downgraded the island, Monti himself warned Sicily could default.

"Something has finally snapped here, it's the end of an era," said Maurizio Bernava, head of the CISL union in Sicily, who claims that pay cheques for transport and refuse collection workers could dry up within months.

"Sicily is on the brink of collapsing, with the risk that we won't be able to pay salaries or even run ferries from the island," said Vecchio.

A cash injection of €400m (£311m) from Rome allayed fears of imminent meltdown, but Sicily continues to pay about 144,000 regional staff, nurses, consultants and temporary workers, including around 26,000 forestry workers – more than British Columbia in Canada – many working limited hours and holding down second jobs.

Full-time office staff total 20,000, one for every 239 inhabitants compared with one for every 2,500 in the northern region of Lombardy, while public officials treat themselves to top wages, notably former waste boss Felice Crosta, who retired on a €500,000 annual pension.

The problem is called clientelismo – handing out jobs in return for votes, a practice that has proliferated since Sicily was granted autonomous status in 1946. "The habit of hiring scores of temporary staff, who will then vote for you in the hope of winning a permanent post, is shameful," said Vecchio. The current governor, Raffaele Lombardo, has promised to end the practice and has hired reformers such as Vecchio to flush out loafers, but the jury is still out on his efforts. "Lombardo sees the times are changing, but has the same Christian Democrat background as his predecessors and has quietly been busy hiring dozens of consultants," said Enrico Del Mercato, co-author of La Zavorra, which lifted the lid on Sicily's civil service.

Nothing sums up the excess in Sicilian politics better than Palermo's Palazzo dei Normanni  – which resembles a baroque palace mixed with an Arab fort and sits on a rise overlooking the city's elegant turn-of-the-century villas, swaying palms, brutal modern suburbs and the piles of rubbish left over from a recent dustmen's strike. It is home to the regional council .

Named after Sicily's Norman occupiers and built on Phoenician and Arab foundations, the palazzo has been refurbished by successive waves of rulers. Between votes, Sicily's 90 councillors can today duck into the Norman chapel, which gleams with wall-to-wall gold-leaf Byzantine mosaics and is topped with an Islamic-style painted wood ceiling.

Parliaments have been sitting on and off in the same room in the palazzo – where friezes on the walls and ceiling depict the exploits of Hercules – since 1560, and councillors have never had it so good, after voting through wages and benefits reckoned to cost Sicilians about €500,000 a year per elected member. A measure awarding members €5,000 for their funeral expenses was only halted thanks to public outrage.

This week the chamber was deserted as members paid tribute to magistrate Paolo Borsellino on the 20th anniversary of his murder by Cosa Nostra, the mafia often hailed as the reason Sicily remains an economic backwater and still front-page news in Italy.

Magistrates now suspect Cosa Nostra agreed to halt a bombing campaign in the early 1990s in return for relaxed jail conditions for mobsters, and that Borsellino and fellow magistrate Giovanni Falcone were killed when they stumbled on evidence of the talks between bosses and government officials.

In Sicily, the mob's influence is still shaping politics. Lombardo is being investigated for mob contacts and has promised to resign this month, while his predecessor, Salvatore Cuffaro, is serving seven years for his links to bosses. But experts believe Cosa Nostra is now on the back foot after losing its role in the global drug trade to the Calabrian 'Ndrangheta and falling back on fixing public works contracts in Sicily.

According to Del Mercato, clientelismo, and the sprawling bureaucracy it generates, has a far greater impact on voting. "Around 70% of votes in Sicily are down to clientelismo; only 5% are conditioned by the mafia," he said. "The mafia is not involved in the distribution of jobs for votes, but the mentality behind it. The idea that 'you depend on me now, so keeping voting for me', is very mafioso," he said.

"Sicilian politicians have been left undisturbed by central government for too long because they have always guaranteed votes in national elections for parties in Rome," said Bernava.

If packing government buildings with under-used staff was not enough, Sicilian governors have created more jobs by forming an army of job skills trainers. "Sicily now has 7,000 instructors, many of whom seem to teach hairdressing, while only 4% of trainees actually get a job," said Del Mercato.

Funding from the European Union is meanwhile seen as a handy cash fix, although Brussels is now demanding €600m be returned after money was spent on dubious projects such as couscous festivals, golf tournaments and the refurbishment of a bar. "Another €7bn in funds has been supplied since 2007 but not spent because politicians are unable to spend it in the transparent way demanded by the EU," said Bernava.

Sitting behind his large desk in the massive headquarters of the infrastructure department, Vecchio spent last week trying to get his office computer to work, six weeks after he took the job as assessor. "There are six computer technicians, none of whom has been able to fix my computer," he said. "I told one that I would throw him and the computer out the window if he couldn't fix it, and I haven't seen him since."

The man who won his spurs fighting the mafia's influence on the construction trade is now going up against a staff who appear to spend a lot of time in the corridors. "You see people wandering around, getting fit," he complained.

Vecchio's claim that Sicily is on the verge of insolvency has been fiercely contested by Lombardo. "If he wants to fire me, he is free to," said Vecchio. Meanwhile, he will continue fighting an enemy – bureaucracy – which he considers more resilient than the mob. "Bureaucracy may not kill you, but it is a thick fog that covers you, a form of psychological violence," he said.