(BERLIN) - German Chancellor Angela Merkel said Monday she was "very impressed" with the stimulus and reform package of Italy's new centre-left Prime Minister Matteo Renzi.

She appeared easygoing about Renzi's comment last week that the eurozone Stability Pact was "a stupidity pact", saying she trusts that Italy will abide by deficit limits.

"I say the glass is half full, and the Italian government is working to fill the glass," the conservative chancellor said after a Berlin meeting with Renzi.

"This is about structural reforms in Italy," she said, welcoming Renzi's pledges to change the labour market and boost sluggish domestic demand.

Renzi, Italy's youngest ever prime minister at 39, took power last month after engineering an internal party coup against former premier Enrico Letta.

He has vowed to radically overhaul the way Italy is governed and drag its stagnant economy, with high youth unemployment, out of the longest recession since World War II.

His mini-stimulus package includes 10 billion euros ($14 billion) in tax cuts for the poor, 3.5 billion euros of investment in schools and a 10 percent cut in a payroll tax paid by employers.

"Italy needs to stop thinking that we need to reform because Brussels or Berlin or other European capitals demand it," he said in a joint press conference with Merkel.

"We do it because it's the right thing for us."

The "ambitious and courageous" reforms will "radically change our institutions," he added. "It's a process that will take several years. But we want to approach every day like it's the key day."

He evoked the Renaissance movement in Florence, of which he was formerly mayor, and said the goal, in partnership with Italy's biggest trade partner Germany, was "a globally competitive Europe".

Merkel, a tough austerity champion during the eurozone crisis, said she was confident that the measures would keep Italy under the three percent deficit ceiling permitted under the Stability Pact.

"I have not the slightest reason to doubt it. And I wish much success and that these reforms can be implemented day-by-day and achieve their intended effect," Merkel said.

She said it was clear to her that "Italy indeed has an eye on the Stability and Growth Pact, with both its components -- growth on the one hand and of course jobs, and on the other hand stability and a commitment to the agreed fiscal pact.

"We see no contradiction between the two and we wish you much success."