Merkel has met with the Greek prime minister in Athens amid further speculation about Greece's position in the eurozone. There were scenes of violence outside as protesters vented their anger over austerity measures.
Police fired tear gas and protesters threw rocks in central Athens during a demonstration to coincide with the visit of Chancellor Angela Merkel.
The German leader met Prime Minister Antonis Samaras at his office, close to the scenes of violence in Syntagma Square.
Speaking at a press conference after the meeting, Merkel said that Greece had already completed part of the task that it had of putting itself on a sound financial footing.
"You are making progress in coming to terms with the difficult task ahead," said Merkel. "Much has been achieved and much remains to be done," she added, saying that the pair had talked about a number of projects. "It will be a long way, but we will see light at the end of the tunnel," she said.
Samaras said that those who had bet on the collapse of Greece and Europe’s "misfortune" would be disappointed. "Greeks are proud people and we know how to honor our friends," said Samaras. "Today we welcome our friend."
Merkel also outlined plans to provide financial help for Athens to reform its health service and regional government administration.
'You are not welcome'
A ban on protests had been put into place throughout most of Athens this Tuesday and 7,000 police officers were deployed to maintain order.
On Monday night, several thousand protesters took to the streets to let German Chancellor Angela Merkel know what they thought of her upcoming visit. Several people held signs telling Merkel "you are not welcome," and some signs compared Merkel to Adolf Hitler.
Merkel's unpopularity in Greece stems from her insistence that Greece adopt strict austerity measures in exchange for international bailout funds. Some of those funds come from the European Union, and as the EU's biggest economy, Germany has ended up footing a large chunk of the bill.
The fact that Merkel is making a personal appearance in Athens is seen by some as a gesture that Merkel wants Greece to stay in the eurozone.
There is, however, also worried speculation that if Greece cannot carry out the harsh austerity measures, it would default on its debt and be forced to leave the common currency area..
The visit comes after finance ministers of the 17-member eurozone on Monday met in Luxembourg to launch a new, permanent bailout fund to help tackle the currency cisis.
The European Stability Mechanism (ESM), which will eventually have access to 700 billion euros ($907 billion) and is due to reach the full amount by 2014, replaces the temporary European Financial Stability Facility. The latter was determined insufficient to help enough member states.
sej,rc/kms (AP, Reuters, dpa)