LISBON (REUTERS).- When Lisbon town hall repainted the graffiti-covered walls of the bohemian Bairro Alto district, the move was welcomed by most, but graffiti artists say the urban art gallery they got in compensation is a farce.

Ricardo Campos, who wrote a thesis on "the anthropology of graffiti," said the art form "came late to Lisbon, some 20 years after its boom in New York, but when it arrived in the 1990s it really exploded."

From luxurious Lapa to drab Almada, every district in the Lisbon area was affected by that explosion, with graffiti covering walls, buses, trains and even national monuments.

But it was Bairro Alto, a grid of narrow alleyways throbbing with armies of revelers each weekend, that suffered most, its historic buildings illegally tainted by primitive paint-spray scrawled signatures known as tags.

Residents and traders complained loudly and late last year Mayor Antonio Costa ordered a clean-up operation that within months led to the re-painting of nearly 16,000 sq m (172,200 sq ft) of walls in Bairro Alto.

The town hall declared the operation a huge success and hopes it can be replicated in other parts of the city.

But the project also brought controversy with the Galeria de Arte Urbana (GAU) - a series of panels on a hill near Bairro Alto where selected graffiti artists are invited to paint.

The city's burgeoning graffiti movement says offering panels for artists to paint on is short-sighted and artificial as graffiti has to be on walls, be it legal or not.

"I don't think it works, it's too formatted, superficial," said a 22-year-old artist known as Vhils, who grew up painting graffiti in Lisbon and now exhibits in galleries in London and Madrid alongside global graffiti stars like Britain's Banksy.

Even Pedro Soares Neves, who as an unofficial leader of the graffiti movement has been its representative with the town hall, calls GAU "a farce."

He said he accepted the Bairro Alto clean-up, hoping in exchange "to open up minds in the town hall on the role played by the artists." He is, however, disappointed that the project didn't include the artists' main request.

"By cleaning they may be just be freeing up space for more tagging. The solution could have been creating authorized walls as has been done in other cities, especially in Germany," said Odeith, who at 33 is a senior member of Lisbon's graffiti world.

They want the town hall to act as curator by choosing walls for the artists to paint on, especially Lisbon's many dilapidated abandoned buildings, provide logistical support and get the local communities behind the idea.

Soares Neves hopes the second phase of the project will include this idea. Silvia Camara, who is in charge of GAU at the town hall, said the gallery is a starting point.

"One of the plans we are studying is an expansion to other areas of the city, maybe even to walls and not under this 'panel' format," she said.

Mayor Antonio Costa, who on Sunday was re-elected for a new term, has pledged to strengthen the "anti-graffiti efforts," but also "widen the GAU experiment."

Academic Ricardo Campos said that what began as a polluting plague needs support to continue its transformation into art.

At first it was a purely illegal activity, the "writers" (artists) created a tag and "bombed" (sprayed their tag) all over the city to earn street credibility.

"But it developed into pictorial language, not just about lettering, but with large-scale murals and a complete visual, sometimes even legal. Most artists do both now," he said.

That development is clear in Odeith's panoramic creations in the Damaia suburb, including a 15-meter-wide work that depicts, in detail, a tsunami hitting Lisbon's main thoroughfare.

It is also seen in Vhils' eerie portraits and anti-consumerism works, etched with complex decay processes using acid and other chemicals.

Campos said the number of graffiti-related events staged in Lisbon this summer shows the movement has matured and that there is an audience for graffiti work.

One show pitched local artists against London ones, the Berardo art museum featured graffiti in its popular "24 hours open" event, and a major university invited graffiti artists to paint on its library walls.

(Editing by Axel Bugge and Paul Casciato)