Christos Tsiolkas is a master of the stain. He's fascinated by the single poisoned spot that runs through a narrative and can never be washed away. In his best-known work to date, The Slap, a single incident  a child being hit at a suburban Australian barbecue  reverberates through the lives of the book's multiple narrators. Dead Europe, his 2005 novel now published in the UK, reveals Tsiolkas working on a larger scale. Here it's the stain of antisemitism which leaks on to every page, soaking the novel's various strands of history, geography and biography in a virulent poison.

The novel's principle narrator, Isaac, is the Australian son of Greek migrants. As he returns to Greece for an exhibition of his photographs, it seems as though we're in for a rather well-behaved novel. There's a third-person narrator who writes, with just a hint of García Márquez, about events in Isaac's place of origin, a Greek village, where during the war a young Jewish boy is hidden from the Nazis in a cave. In the present, and the first person, there's Isaac's seemingly liberal voice, viewing Europe with a bemused outsider's eye, musing about the political worth of his photography and indulging in some casual sex as he misses his boyfriend back home in Australia. Everything leads the reader to expect the literary equivalent of television's Who Do You Think You Are?, a celebration of the multiple strands of history and geography that make up a contemporary individual.

Then the novel takes an unexpected turn into darkness. In the Greek past, Michaelis, whose young bride blames her childless condition on the Jew hidden in the cave, commits a terrible act. Meanwhile, in the present, Isaac is exploring Venice and discovers the Jewish museum. Forbidden to take photographs, he lets out an anti-semitic cry which he realises he'd been longing to release "since the beginning of time". Still, it seems possible for the novel to progress along liberal, rational lines: both in the past and the present, a crime has been committed, but there are 250 pages left for atonement: everything, we tell ourselves, is going to be OK.

But atonement never comes and everything is decidedly not OK. We're taken back to Isaac's earlier visit to Europe, at a point in the 1990s when history lurched forward with the arrival of neo-liberal capitalism. Visiting Prague, Isaac finds a city that has abandoned history and morality in its rush to embrace the new economy. But more disturbing than the emptiness of the Czechs he meets is our growing distrust of Isaac. Encountering young men involved in a burgeoning gay porn industry, his sexual appetite becomes more insistent and more violent, straining the sympathy of even the most liberal reader.

As he travels through France and Britain, Isaac seems to find nothing but ugliness and violence. The old world seems unable to escape from the enmity of wars and empires, but surely there's more innocence in the new world. Australia, we start to hope, may offer some respite. But then we learn more about the lover waiting back at home. Chris, we're told, has a swastika tattoo, emblem of a fascist youth which led to the desecration of a Jewish grave, an act for which he refuses to offer any repentance. Who is Isaac, we start to wonder, a narrator who has a cosy domestic arrangement with a neo-Nazi?

When Isaac meets a young Brazilian woman on a train to Berlin and invites her into the toilet for sex we're destabilised by this sudden, casual turn to bisexuality. But as Isaac describes in gothic detail his hunger for the woman's menstrual blood, the reader is forced at last to accept that we're in the company of someone who bears more than a passing resemblance to a Bret Easton Ellis vampire.

Dead Europe is a narrative in which history and geography are cut loose to spin around each other and in which the narrative voice grows steadily more unreliable. But Tsiolkas is no playful postmodernist. Neo-liberalism hasn't set us free, he suggests, to enjoy a new multicultural world of globalisation. Instead, his novel pitches us into an environment where an illusion of freedom masks a murderous Balkanisation and the only thing that unites us is our centuries-old hatred for each other. There is a hell, Tsiolkas seems to say, and we're living in it.

 Mark Ravenhill's Ten Plagues and the Coronation of Poppea  Texts for Music Theatre is published by Methuen.