Westerwelle, holding talks with Greece's reshuffled government ahead of an EU-IMF progress report which will determine whether it receives its next cash lifeline, dismissed talk that Athens would need a further debt writedown.
"My impression is that we for the first time are seeing a faint silver lining on the horizon," he told reporters after talks with Evangelos Venizelos, who brokered a debt writedown last year and became foreign minister and deputy prime minister last month in a government shake-up.
"In politics, psychological momentum counts too and when the sky starts brightening and people start in again with doomsday scenarios and looking backward, then you miss out on that psychological momentum."
Asked specifically about speculation Greece would not be able to cope with its mountain of debt, he said: "A further debt writedown is not on the agenda."
Germany is the paymaster for the international bailouts for Greece but has triggered widespread anger in the debt-mired nation for an insistence on biting budget cuts in return for assistance.
Chancellor Angela Merkel faced mass protests during a visit to Athens last October.
Experts from the European Central Bank, the European Union, and the International Monetary Fund (IMF) are currently in Athens to review Greece's progress in implementing deep reforms.
On the basis of their findings, a Eurogroup meeting in Brussels Monday will determine whether Greece can draw €6.3 billion ($8.2 billion) from its ongoing bailout.
The IMF is also scheduled to decide by the end of July whether to disburse its own scheduled contribution of €1.8 billion.
Since 2010, the EU and IMF have committed a total of €240 billion to the heavily indebted country.
Merkel said in an interview published Wednesday she believed Greece could service its enormous debt without any new imposed writedown.
And ECB executive board member Joerg Asmussen said that talk of new writedowns was "not helpful", urging Athens instead to press on with reforms.
Last year, Greece erased nearly a third of its overall debt through an unprecedented writedown of more than €100 billion held by private creditors including banks and pension funds.
Nearly €30 billion of additional debt were subsequently recovered in a buyback achieved with bailout funds.
Westerwelle said he had intended his visit as a sign of Germany's "solidarity and encouragement".
"We Germans know the load you are bearing, what you are achieving and the deep valley you are crossing. But I can assure you that if you continue on this reform path, it can be the birth of a new economic upswing," he said. "Greece can make it, I am sure of it."
Venizelos said he appreciated Germany's understanding that reforms meant hardship for average Greeks.
"The Greek people have made these sacrifices because in reality they want to fortify our national sovereignty and independence, they don't want Greece to depend on either the markets or the essential help of our European partners," he said.
On Thursday, Westerwelle will meet Prime Minister Antonis Samaras, who now leads with a wafer-thin, two-party majority after moderate leftist party Democratic Left quit the ruling coalition.
Merkel, who faces a general election in September, hosted a pan-European conference in Berlin on tackling critically high youth unemployment in stricken eurozone countries such as Spain, Portugal and Greece.