Merkel said she sensed "great determination to master this difficult phase," during talks with Prime Minister Pedro Passos Coelho, guarded by a large police turnout across Lisbon.

For Portugal's population the times were hard, Merkel said. Demonstrations prompted by her trip "belong to democracy but this should not dissuade politicians from doing what's necessary," she said.

"The programme is being fulfilled by Portugal in an
excellent way," she said.

Civic and trade union groups had reacted to Merkel's visit by urging Portuguese to wear black clothes at workplaces, schools and in public. Numerous Lisbon statues were also wrapped in black.

Outside the coastal fortress, six kilometers from Lisbon's inner city, where the talks took place, several hundred demonstrators chanted "Merkel, no!" and "Out of here!"

Coelho acknowledges hardship

Passos Coelho admitted that Portugal's "social and political climate" had deteriorated but said Portugal was on course to wrap up its savings drive by 2014 and return to the open finance market to seek loans.

The premier rejected accusations that Merkel was partly responsible for Portugal's crisis. This assertion had "little broad support," Passos Coelho said. "It is important for us and Europe that the consolidation program functions."

Armenio Carlos, who heads the CGTP trade union reacted to Merkel's brief visit, saying: "We have a government that has no mind of its own, just doing what Merkel tells them, what the European Council decides."

In 2011 Portugal got a 78-billion-euro ($100 billion) bailout from the European Union, European Central Bank and International Monetary Fund by pledging to slash its budget deficit to 3 percent of Portugal's Gross Domestic Product by 2014.

Brave, says Merkel

Merkel described the actions of the Portuguese government as brave, adding that Portugal's chances of returning to growth had improved very much.

She offered German help to develop Portugal's vocational training system for its unemployed youth.

This year, Portugal's economy has shrunk three percent and unemployment has reached a record 15.9 percent, according to official statistics.

Steps enacted by Passos Coelho's center-right government have included labour market reforms, state company privatizations, sharply cut spending and massively raised taxes.

"We have an elementary interest that all countries of Europe do well," Merkel said, adding that it was Germany's task to boost its consumption of European produce and to help enhance inner-European economic cooperation.

"Countries that still have scope must try to foster their domestic consumption for imports from Spain and Portugal," she said.

She also said that Monday's talks in Lisbon had included the possibility that the European Investment Bank assist small and medium-sized Portuguese firms.

At a parallel conference of Portuguese business leaders, Portugal's Economy Minister Alvaro Santos Pereira said his country must boost exports in a sustainable manner.

ipj/dr (dpa, AFP, Reuters)