GO
Loading...

UPDATE 1-Merkel visits Athens to boost Greek government after bond sale

* Merkel praises Greek reforms, pledges further help

* Says eurozone to discuss Greek debt sustainability

* Anti-bailout protests fizzling out

(Adds Merkel comments, rallies)

ATHENS, April 11 (Reuters) - German Chancellor Angela Merkel pledged on Friday to continue backing Greece, one day after the debt-laden country tapped bond markets for the first time since its international bailout began four years ago.

Greek reforms are paying off, Merkel said in a symbolic visit to mark the economic rehabilitation of a nation that over the past four years has threatened the stability of Europe and its single currency.

"We see that Greece is fulfilling its pledges... We will continue to support Greece in the future," Merkel said in a joint press conference with Samaras, adding that Athens was meeting its budget targets, opening the way to discuss further debt relief measures in the months to come.

In a sign that the focus of Greece's bailout program is gradually shifting towards less austerity and more growth, Merkel and Samaras met startup businesses and said they would accelerate the creation of a 500-million euro fund for small and medium enterprises, sponsored by Greece, the EU and Germany.

Hundreds of angry Greeks gathered in an uneventful rally to protest Merkel's visit in central Athens, a far cry from the tens of thousands which had rallied the last time she arrived in the city back in October 2012.

"We want her out! Raus! And when she goes she should also take the Greek government with her because they betrayed us. They sold us out to Germany," said Roula Darzakou, a 48-year old housewife. "We want our country back, we don't want her money."

More than 7,000 officers were deployed on the streets of Athens to keep watch on the rallies. Athens has seen a number of violent demonstrations in recent years, and public protests were banned in the areas in which she will move.

Her visit caps a watershed week for Greece. Strong investor interest in Athens' first bond sale in four years is seen as a vindication of the wrenching spending cuts and other austerity measures that Greece has undergone in exchange for the 237 billion euro international bailout. Many say the investor appetite underscores growing optimism in the other so-called periphery countries that suffered the most during Europe's debt crisis.

Yet the human cost of the bailout-imposed measures are painfully visible on the streets of Greece, where thousands of companies have closed shop. Unemployment in January stood at 26.7 percent, near a 27.7 percent record, with about 1.5 million people out of work, but the lowest level in 11 months.

Many here criticised the German Chancellor and the government of engineering the high-profile visit to coincide with Thursday's bond issue and boost Samaras's chances before a key European election in May. Opposition parties and labour unions said they would hold rallies outside the banned zone to protest Merkel's visit.

"Merkel visits Athens to praise the government's destructive work and make sure that austerity continues," the main opposition leftist Syriza party, which opposes the country's international bailout, said in a statement.

DELIBERATE TIMING

An EU source told Reuters that Thursday's 3-billion euro bond sale, initially planned for the second half of the year, had been deliberately brought forward to the eve of Merkel's visit to support Samaras, whose conservative New Democracy party is slightly behind Syriza in the polls.

Anti-German sentiment has grown during Greece's austerity-fuelled economic crisis and many of those struggling with record unemployment and falling living standards blame Germany's insistence on fiscal rigour for their economic woes.

Berlin is the biggest single contributing nation to Greece's bailouts, which have kept the country afloat since 2010 and saved it from bankruptcy. Germany has extended to Athens at least 15 billion euros of bilateral rescue loans as part of the bailout.

The two countries have a complex history that has complicated the debate. Greece is Europe's only bailed-out country that was occupied by German troops in World War Two, and frustration with austerity policies has revived a dormant claim to press Berlin for billions of euros of war reparations.

Unidentified assailants opened fire on the German ambassador's residence in Athens with a Kalashnikov assault rifle in December.

Pictures lampooning Merkel are commonplace in Athens, while groups opposing Greece's bailout frequently protest outside the German Embassy. Public sector workers pelted a German diplomat with water bottles and coffee in a protest over austerity measures last year.

Greek prosecutors have also recently filed charges against former local representatives of German companies, accusing them of having paid bribes to win technology and defence contracts, indirectly boosting the country's debt.

On the other hand, Germany offered work to hundreds of thousands of Greeks after the war, helping them rebuild their country and escape economic hardship and political oppression at home. Athens has received billions of euros of European aid since it joined the European Union in 1981, much of it paid by Germany.

In Germany, anger at Greece's taxpayer-funded bailout has boosted the eurosceptic Alternative for Germany (AfD), a small party that failed to get into the Bundestag in last year's election, but is expected to make more of an impact in the European elections.

Greece's successful return to bond markets on Thursday was "no progress", AfD said in a statement. The party's leader Bernd Lucke said "international investors will have no problem passing their future risks onto taxpayers in the euro zone".

Fitch ratings agency, which maintained its 'B-' rating for Greece, also injected a note of caution: "(The bond sale's) success does not guarantee that Greece will have made a sustainable return to market funding by the time the current programme ends later this year."

"Political risk to reform and consolidation remains high, with reform fatigue reflected in the government's small parliamentary majority and the opposition's anti-reform stance," it added.

(Additional reporting by Karolina Tagaris in Athens, Paul Taylor in Paris and Stephen Brown in Berlin; writing by Harry Papachristou; Editing by Alessandra Galloni and Will Waterman)