• Leaders of Italy, France, Germany meet to plan EU’s future
  • Post-Brexit talks held on Italian navy ship in Mediterranean

German Chancellor Angela Merkel lauded Italian Premier Matteo Renzi’s economic policy as “courageous,” while signaling that European Union budget rules can’t be bent to help Italy boost growth.

Merkel’s comments alongside Renzi and French President Francois Hollande hinted at one of the divisions between the leaders of the euro area’s three biggest economies as they met on Monday to plan the European Union’s way forward after Britons voted to leave the bloc. Italy’s economy stagnated in the second quarter, pushing off budget forecasts, and Renzi is pressing for greater flexibility by the European Commission.

“The stability pact has a lot of flexibility, which we have to apply in a smart way,” Merkel told reporters aboard the Italian aircraft carrier Giuseppe Garibaldi, where the leaders discussed topics from refugees, border controls and terrorism to jobs and investment. “Europe isn’t the most competitive place in the world in all sectors yet.”

Renzi signaled he’ll push ahead with his reforms even as his public standing slips.

“Italy’s deficit is at the lowest level of the last ten years,” Renzi said. The government “will go ahead with structural reforms and deficit reduction for the good of our children and grandchildren,” he said.

Hollande said the U.K. referendum in June to leave the EU is spurring uncertainty that requires a response by EU leaders, including measures that feed through to people’s everyday lives, including more jobs for young people. Europe is “on the spot” after Brexit and policy makers need to show they can deliver “results,” Merkel said.

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