Merkel a 'believer' in Greece after tough reforms

(ATHENS) - German Chancellor Angela Merkel on Friday said she "firmly believed" there was untapped potential in Greece after years of tough austerity reforms that culminated in a bond comeback this week.

"I firmly believe that after a very, very tough phase, this country harbours boundless possibilities still to be exploited," Merkel told a group of young Greek entrepreneurs at the start of a one-day visit to Athens.

Merkel is in Greece for the second time in two years to applaud reform efforts, a day after the crisis-hit eurozone economy made a triumphant return to bond markets.

On Thursday, Greece ended a four-year exile from bond markets with a five-year debt issue that raised 3.0 billion euros ($4.2 billion).

Merkel is also expected to discuss Germany's contribution to a 500-million-euro ($690-million) investment fund to help the Greek economy shake off a six-year recession.

Police threw a massive security cordon around the Athens hotel and government headquarters that Merkel was due to visit for talks with Greek Prime Minister Antonis Samaras.

The operation was mainly geared at preventing anti-austerity protesters from approaching the German chancellor, but it also came a day after a powerful car bomb exploded outside a Bank of Greece building in central Athens.

Greek media were warned of the early morning attack by telephone and police had time to clear the area before the explosion, preventing injuries.

Leftist groups are planning protests against Merkel, who is seen in Greece as a key proponent of the austerity drive applied in Europe in the last four years.

When the chancellor last visited in October 2012, riot police fired tear gas to disperse protesters attempting to storm a steel barricade near parliament, just blocks away from where she held talks with Samaras.

Small gangs of masked youths also threw bottles at police, while two Nazi flags were draped on the barricade and set on fire, to the consternation of authorities in Berlin.

One of the Friday protests was organised by the radical leftist Syriza party, which is strongly opposed to austerity and whose leader Alexis Tsipras is a candidate for EU commission president in the upcoming European parliament elections in May.

Tsipras said Greeks should be "wary" of Merkel's gifts and that austerity, which plunged Greece in recession, threatened the whole of Europe.

"The medicine chosen for Greece was more detrimental to the country than the disease...we have social disintegration and a humanitarian crisis, and we have failed in all our fiscal targets," Tsipras told Austrian TV channel ORF.

"There is a view that the European economy will be more competitive...with a periphery under China-level wages. This is a mistaken policy...that threatens all of Europe," the leftist leader said.