* Protesters storm building, try to stop meeting
* Angry public sector workers attack German envoy
* Police use teargas, truncheons to break up crowd
* Germany's Fuchtel says his remarks misinterpreted
Public sector workers stormed a building where Greek and German officials were meeting in the northern city of Thessaloniki on Thursday and pelted a German diplomat with water bottles in a protest over austerity measures.
Riot police used teargas and truncheons to break up a crowd of 250 city employees outside the building and formed a shield around German Consul Wolfgang Hoelscher-Obermaier as he entered.
Protesters chanted "It's now or never!" and held up mock gravestones and banners proclaiming "Fight until the end!".
They said they were furious at comments by German envoy Hans-Joachim Fuchtel, who told journalists on Wednesday that Greece could do more to reform its bloated local government sector, the head of the workers' union said.
"Experts say that as far as local government is concerned the work carried out by 3,000 Greek employees can be done by 1,000 Germans," Fuchtel said. On Thursday he said his remarks had been misinterpreted.
Fuchtel was appointed by German Chancellor Angela Merkel late last year to explore ways to boost grass-roots cooperation between the two countries, and has been lampooned as overbearing in Greek media.
His comments struck a nerve in Greece at a time when its lenders, the European Union and International Monetary Fund, have demanded layoffs and steep spending cuts in exchange for a second, 130-billion-euro ($165-billion) bailout.
At the Thessaloniki city hall, a woman who answered the switchboard phone said: "No one can talk to you now. They have occupied the building."
A spokesman for the German Foreign Ministry said: "No one was hurt and there was no material damage. The meeting continues as planned and that's what's important."
"SEND HIM HOME"
Municipal employees have held several nationwide protests and strikes in recent weeks against the new wave of budget cuts, triggering severe disruptions in public transport and causing garbage to pile up across the capital.
The head of the POE-OTA union of municipal workers, Themis Balasopoulos, said Fuchtel's comments showed the government planned to push ahead with controversial public sector layoffs, about 2,000 of which are scheduled by the end of the year.
Unions and some politicians oppose the layoffs, which are mainly expected to target local government workers.
"We are here to express our deep anger at his absurd comments," Balasopoulos told Reuters from the protest in Thessaloniki.
"We are not a democracy - we are under German supervision. If we had decent politicians they would have put him on a plane last night and sent him back home," he said.
Many Greeks, worn down by years of austerity, blame Merkel for forcing the painful cuts in exchange for the bailouts.
In Germany, media have long characterised the Mediterranean state's 11 million people as lazy, corrupt and ungrateful.
Tens of thousands of Greeks protested against a visit by Merkel to Athens in October and some burned Nazi flags.