Turkish Prime Minister Recep Tayyip Erdogan, on his first trip to Greece since 2004, promised to support the country's efforts toward financial recovery. Faced with the specter of bankruptcy, Athens has secured 110-billion-euro ($138 billion) in rescue loans from European countries and the International Monetary Fund - after pledging deep-cutting austerity measures.
"This visit for us is historic and has special importance," Erdogan said Friday.
The two NATO allies came to the brink of war three times between 1974 and 1996 over the ethnically divided island of Cyprus and territorial rights in the Aegean Sea, and military tension remains.
Although relations improved markedly after both countries were struck by successive earthquakes in 1999, the momentum wore off. In 2006, a Greek fighter pilot died after colliding with a Turkish jet in one of the frequent mock dogfights between the two air forces over the Aegean.
This time, the two countries are going big. Turkey's 380-strong delegation in Athens on Friday included 10 Cabinet ministers and about 100 businessmen.
Erdogan and Greek Prime Minister George Papandreou, who was instrumental in easing Greek-Turkish hostility during his 1999-2004 tenure as foreign minister, chaired a first-ever joint Cabinet meeting - launching a series of annual meetings that will alternate between the two countries.
Erdogan said ministers will sign 22 agreements on issues from energy cooperation and combatting illegal immigration to promoting Greece and Turkey as joint destinations for Chinese tourists.
Greece is the European Union's largest military spender in proportion to its annual output, due to an arms race with its eastern neighbor.
Erdogan said that should change for both countries.
"Both countries have very large defense budgets. ... We must reduce these expenditures and use the money for other purposes," he said.
Greece has announced plans to slash military operating costs by up to 25 percent this year, to about ¤6 billion, although the cuts would not affect arms procurement programs - many from key European partners involved in the country's debt bailout.
Officials in Athens have long argued that tension with Turkey must be resolved before military spending can be reduced.
But Deputy Prime Minister Theodore Pangalos sounded less cautious Friday.
"I honestly feel national shame each time I am forced to buy weapons we do not need - based on an objective and correct estimate of the dangers the world as it is holds for Greece," he told a Greek-Turkish business conference.
"I know that on the other side of the border too the Turks are also buying weapons they do not need ... due to an imaginary threat that arises from a political confrontation, which can be solved and must be solved." Pangalos said that would allow Greeks and Turks alike to prosper "making productive use of the colossal sums that both you and we currently waste on defense spending." Erdogan said the business conference would open a new era in trade. The countries in 2007 inaugurated a natural gas pipeline connecting their grids, a year after Greece's largest lender, NBG, acquired Turkey's Finansbank AS.
"Our businessmen will find the opportunity to meet frequently," Erdogan said.
Selim Egeli, chairman of the Turkish-Greek business council, said improved diplomatic relations was key to good business.
"Businessmen don't feel comfortable when diplomatic relations are bad," Egeli said. "If the politicians manage to solve the remaining problems, the benefits will be tremendous." He said a key field of cooperation could be tourism, "if we can get Greek and Turkish companies together, to promote the two countries as one tourist destination." Bilateral trade grew over the past 23 years from some $200 million to $3.5 billion. Greece is currently the seventh biggest foreign investor in Turkey, with direct investments of some $6 billion.
Erol User, CEO of Turkish investment banking firm User Corp., said the time had come for both countries to look forward.
"When we had the big disaster of the earthquake in 1999 Prime Minister Papandreou was the first person who tried to help Turkey, so now there's an economic earthquake in Greece now is the time for our Prime Minister Erdogan to help Greece," he said.
But User said business cooperation should go beyond Greece's debt crisis. "We are looking for long-lasting cooperation, not short-term opportunities," he said.
Security in Athens was tight, with at least 1,500 police deployed a day after a bomb exploded and injured one person outside Greece's largest prison on the capital's outskirts.
A fringe nationalist group was planning a protest later Friday against what it described as "the Sultan's visit."