Renzi Wins Merkel Confidence Vote for Economic Change in Italy

Chancellor Angela Merkel gave her stamp of approval to Italian Prime Minister Matteo Renzi’s plans to cut taxes and ease labor rules, saying she’s confident he will meet his deficit-reduction goals.

“From my side, I want to say that I’m very impressed,” Merkel said after hosting Renzi for talks at the chancellery in Berlin today. “This is about structural change in Italy. I wish him luck and strength, because this is a message that we all welcome very much.”

Standing next to Merkel at a joint news conference, Renzi cited Germany’s earlier labor-market overhaul as “a point of reference” and pledged to stick to the euro area’s deficit limit, saying Italy “doesn’t want to change the rules and send the message that the rules are bad.”

Renzi traveled to Berlin to lay out his fiscal and economic plan to Merkel five days after presenting it in Rome in an effort to spur growth in the euro area’s third-biggest economy. Italy matched the maximum target at a bond sale on March 13 where three-year debt fell to a record low.

Merkel said Italian bond yields show “very clearly” that markets “are pinning hopes on the project” started by Renzi and she has “not the slightest reason to doubt” that he’s committed to meet fiscal goals.

In today’s meeting, Renzi “made it clear that Italy on the one hand aims to generate economic growth and on the other hand to pursue structural reforms,” Merkel said. “I view that as very important, but so do international financial markets.”

Renzi, who took office Feb. 22, is calling for 10 billion euros ($14 billion) of tax cuts for lower-income workers and easier labor regulation to stimulate hiring.

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