(ANSA) - Berlin, March 17 - Italy's fledgling government received a powerful vote of confidence on Monday from German Chancellor Angela Merkel, who praised Italian premier Matteo Renzi's "courage" in making significant structural changes in Italy's economy. During the first bilateral meeting between the two since Renzi was made premier last month, Merkel, the head of Europe's largest economy, said she looked at "all aspects" of Italy's reforms, adding she was impressed and wished Renzi "a lot of luck". "It is clear to me that Italy is paying attention to (fiscal) stability as well as to growth and employment," she added.

Last week Renzi, who became Italy's youngest premier at 39 after unseating his PD colleague Enrico Letta last month, unveiled reforms aimed to boost growth and productivity after emerging from recession, Italy's worst since World War II. On Wednesday he presented plans to cut income taxes by 10 billion euros, invest 1.74 billion euros in social housing programs, spend 3.5 billion euros on schools and repay 68 billion euros in outstanding bills, among other things.

Speaking after meeting with Merkel, Renzi said those reforms were made with Italy's best interests in mind, not Europe's. "Italy must stop thinking reforms have to be done because Brussels or Berlin or other capitals ask us. We'll do them because they're right for us," Renzi said. He went on to call them "irreversible". "They won't be one-off but irreversible measures for change," Renzi said. He also assured his German counterpart that such measures would not counteract the country's commitments to Europe, and insisted that Italy did not wish to breach the 3%-deficit-to-GDP threshold allowed by the EU. "Italy intends to respect all limits," said Renzi.

Merkel as well said that she was "certain" Italy will respect the European Union's Growth and Stability Pact including the 3% limit on Italy's deficit-to-GDP ratio. Turning to the labor market, Renzi called Germany's policies a "reference point" for Italy's plans to free up the labour market and create jobs. Despite Italy slowly coming out of recession since the second half of last year, unemployment continues to rise, nearing 13% across all demographics, and topping 40% for youth. Renzi on Monday said past efforts to create jobs through "precise and restrictive legislation have failed". "Now we need to change the rules of the game," added Renzi, as he went on to call the unemployment rate, especially among youth, "unacceptable". Merkel then hailed Renzi's labour-market reform plans, saying the measures contained in his Jobs Act "go in the right direction". Renzi ended his reflection on the enfeebled economy by pointing to a lack of growth as Italy's biggest problem. "Our problem is the lack of growth," especially when compared with the size of the debt, now just over 132% of gross domestic product (GDP), he said.

Earlier in the day German Finance Minister Wolfgang Schaeuble hailed Renzi's plans to boost growth, but said Italy should continue with fiscal consolidation. Schaeuble met with Economy Minister Pier Carlo Padoan, whose office reported that the talks were held in a "constructive atmosphere", while Renzi met with Merkel.

Finally, Renzi turned to foreign policy, where the crisis in Ukraine is the most pressing issue facing European leaders. Renzi said Italy, Germany and other European countries are working to keep open "strong channels of dialogue" with Ukraine.

He added that Sunday's referendum in Crimea on independence "was illegitimate".