Critics see Merkel as the main enforcer of the European Union-imposed austerity measures that have left a large number of Greeks unemployed and streaming to soup kitchens for a hot meal.
Police estimate as many as 25,000 people turned out to demonstrate in central Athens, despite a ban on protests in certain areas amid beefed-up security for Merkel's six-hour visit.
Merkel, who arrived in Athens Tuesday for her first visit in several years, spoke of Greece as a partner and a friend to Germany as she addressed reporters with Greek Prime Minister Antonis Samaras.
Merkel noted that Greece was going through a "very difficult phase" in which many people were suffering, but insisted the debt-stricken nation had already made progress in reducing its deficit and passing reforms.
"It's for this reason that I would like to say that a huge part of the journey has already been accomplished," she said.
The two nations "are going to work very closely together," she added, as fellow members of Europe and the euro.
Samaras, whose government is seeking new ways to implement budget cuts of 11.5 billion euros ($14.49 billion) to ensure the country receives another international bailout installment later this month, also stressed the strong ties between the two nations.
"The Greeks are proud and they know how to show support for their friends, and we welcome a friend here today," Samaras said of Merkel.
Greece would show those speculators who had wagered on its collapse and exit from the euro zone that they were wrong, he said.
A number of arrests were made in Syntagma Square, by the Greek parliament building, with objects thrown at riot police as tensions rose after Merkel's arrival.
Many protesters, some of whom belong to labor unions and Syriza, the radical-left opposition party, are carrying anti-Merkel banners.
"Merkel we are a free nation and not your colony," said one banner. Another read, "Merkel Raus (out, in German). Murderer of 3,500 Greeks," a reference to the number of Greeks who have taken their own lives, according to some estimates, as a result of the current hardship.
Before her visit, Merkel told CNN she knows the austerity measures have been hard on some.
"It's very bitter obviously, sacrifices need to be made," Merkel said. "But I think these are necessary measures that have to be taken, I think it was not easy for anyone to impose those measures on them but these, I think, have been made on the background of great experience."
In return for international bailout funds, Greece has agreed to the austerity program and labor market reforms -- measures that have led to violent street demonstrations in the past.
Speaking in Syntagma Square, Syriza leader Alexis Tsipras said Merkel had come to Athens in support of Samaras and his ministers "while the people are on their knees ahead of new, barbaric measures."
But, he said, her visit would allow the Greek people to send a message to the rest of the Europe that they were stronger than those supporting the bankers and bailouts.
"The democratic tradition of Europe will not allow a European people, the Greek people, to be transformed into a crisis 'guinea pig' and for Greece to become a vast social cemetery. We will win in the end, because we are right and we are many," he said.
To comply with the belt-tightening measures, salaries have been cut for many workers in Greece, pensions and benefits have been slashed and unemployment rates have soared.
As of May 2012, 53.8% of Greeks younger than 25 were unemployed, according to Eurostat, the statistics division of the European Commission.
A number of those demonstrating in Athens Tuesday said it was the first time they had taken to the streets to protest the economic crisis -- a reflection, perhaps, of how widely the anger over austerity is now felt.
The average age of those demonstrating Tuesday seemed higher than at most of the recent protests.
Many are retirees, the group that has lost, in many cases, more than 30% of their income since the crisis hit. Retirees are also among the groups that will be most affected by the new measures to which Greece must agree in order to receive the next tranche of its international bailout loan.
Maria Kirioni, a 53-year-old civil servant, told CNN she was protesting for the first time since she was a university student.
"Merkel does not know what is going on in Greece. She only hears the politicians' voices. We must show her. It would be better if she stayed longer to see the reality," Kirioni said.
Another woman asked about her feelings about Merkel's visit also voiced her frustration. "To come and do what? Why should she come? They should just get rid of her and all the rest of them with her," she said.
But Rafael Voulgarakis, a university student, welcomed the German chancellor. "It is clearly positive, because as we know Germany is the largest power in Europe at the moment and one of the largest powers in the world," he said. "It is clear that the support of Ms. Merkel is good for our country and is needed."
German Foreign Minister Guido Westerwelle told Bild newspaper last week that Greece deserves "fairness and respect." He suggested that Merkel's visit represents a show of eurozone solidarity between those nations which are fiscally healthy and those that are debt-ridden and battling with savage cuts and social unrest.
Christoph Weil, a senior economist at Commerzbank, told CNN that Merkel's visit to Athens comes as a "surprise" and that there was "a significant risk that Greece will exit the euro in the next two years."
However, Wolfango Piccoli, director of Eurasia Group, says the risk of a Greek exit from the eurozone remains "marginal" at the moment and that the Troika will provide Greece with the next tranche of bailout funds to meet its debt obligations.
But Piccoli warns that the country will have to undergo stringent austerity measures before creditors will release any funds.
"The vast majority will come from an additional round of cuts to wages and pensions. It's going to be almost 8 billion euros of the 13.5 billion euros coming from that. The total cut is 11.5 billion euros and then 2 billion euros of additional taxes," he told CNN.
On Monday, the Eurogroup -- a meeting of eurozone finance ministers -- convened in Luxembourg to give the green light to the European Stability Mechanism, the 17-nation currency bloc's permanent bailout fund.
Spain is expected to be the first country to make a request for financial aid from the ESM.
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