The Greek and Turkish governments hailed a "big step forward" in their relations on Friday, the first day in Turkish Prime Minister Recep Tayyip Erdogan's stay in Athens, which he said marked "a historic moment".

The two governments agreed to set up a council to hold regular meetings between the two countries' leaders and their cabinet ministers, and inked pacts on the economy, immigration, energy and other issues.

"I am confident that the novel and courageous step we are attempting today can pay off because the will is there," Greek Prime Minister George Papandreou said at a joint news conference with Erdogan on Friday.

The two countries also signed a number of deals, including an accord allowing illegal migrants coming from Turkey to Greece to be sent back, an issue that has been a major source of discord between the arch-rivals.

Still, calls to reduce arms in both countries were left unanswered on Friday during Erdogan’s first official visit to the Greek capital since 2004, AFP reported.