UPDATE 1-German finance minister to offer Greece bilateral aid
* Schaeuble resented in Greece for stance on austerity
To make 100 mln euro offer on Athens visit Thursday
* Berlin seeking bilateral deals to support crisis countries
* Athens offer smaller than 1 bln euro Spanish plan
By Sarah Marsh and Gernot Heller
BERLIN, July 17 (Reuters) - German Finance Minister Wolfgang Schaeuble will offer Greece 100 million euros ($131 million) for a fund to promote economic growth in a visit to Athens on Thursday in a move unlikely to appease protesters who resent his firm stance on austerity measures.
Tens of thousands of Greek workers have taken to the streets to protest this week against government plans to fire public sector employees to satisfy foreign lenders who granted debt-stricken Greece a multi-billion euro aid tranche this month.
Demonstrators say they cannot cope with any more spending cuts or tax hikes - a message their government will relay to Schaeuble, Europe's leading proponent of economic austerity.
"The German finance minister is not going to Athens to tell them how to do their homework," a government official told reporters in Berlin. "Rather, his aim is to encourage them to continue their path although it is very difficult, and to talk about concrete, bilateral cooperation."
Schaeuble's visit comes ahead of a G20 meeting of finance ministers and central bankers in Moscow on Thursday and Friday.
Many Greeks blame Germany's insistence on austerity for their economic crisis and pictures lampooning Chancellor Angela Merkel are commonplace. Unemployment in Greece is nearly 27 percent, more than double the euro zone average of 12.2 percent.
It does not help that Merkel is seen pushing back a debate about further debt relief for Greece until after German federal elections in September. She has said she does not see the need for a fresh "haircut".
Merkel is favoured to win a third term, in large part because voters believe that during the debt crisis that first erupted in Greece in late 2009 she has shielded them from the kind of losses such a haircut might yield.
The German government official said Germany's offer of bilateral assistance was meant to demonstrate faith in Greece's ability to recover though it was contingent on certain conditions and on the creation of an appropriate business model for the fund.
GERMANY'S BILATERAL APPROACH
Blamed by citizens not only in Greece but elsewhere in southern Europe for insisting on spending cuts and structural reforms in exchange for bailouts, Germany is keen to shore up its image as the risk of social and political unrest grows.
EU leaders agreed earlier this year to free up 6 billion euros over a seven-year period to fight youth unemployment. Germany is pushing for that sum to be deployed rapidly.
On a bilateral level, Germany has said it will grant Spanish small and medium-sized companies (SMEs) aid of roughly 1 billion euros ($1.30 billion). The finance ministry has said the scheme could serve as a model for others, particularly Portugal, which suffered political unrest earlier this month.
Greece last week secured a lifeline from the euro zone and the IMF but was told it must keep its promises on cutting public sector jobs and selling state assets to receive all of the cash.
The tough approach underlines waning patience with Greece, which has been kept afloat on emergency funding since May 2010 but has failed to carry out all reforms demanded of it.
On Wednesday, the European Commission rejected media reports of a 10 billion euro funding gap for Greece. There is no shortfall in Greece's financial aid for the next 12 months and the gap foreseen at the end of 2014 is small, the Commission said.