German Chancellor Angela Merkel on Wednesday lavished praise on Italy for its efforts in cutting its budget deficit and economic reforms, saying she believed the reform measures would be fruitful.

Addressing a press conference together with visiting Italian Prime Minister Mario Monti, Merkel said the wide-ranging consolidation and reform agenda of the Italian government was impressive, and that she was personally convinced that "these reform efforts will bear fruit."

Monti, for his part, reiterated that efforts to consolidate state finances and reforming its economy with a series of austerity measures and tax hikes had paid off.

The foundation for future growth was well under way, he said.

"Markets are in the process of recognizing the successes," Monti said, citing his government's successful auction of 9 billion euros (11.3 billion U.S. dollars) worth of national bonds with markedly lower interest rates.

Merkel praised the successful bond auctions as a "hopeful" sign for Italy, saying economic reform would help investors regain confidence in the common currency.

Merkel added that "nothing concrete" had been put on the table vis-a-vis Italy's future application for a sovereign bailout.

"We know that we have not completed our stabilization, but we have achieved a lot in a short time," Merkel said, adding that "we need to continue along this path together."

The two leaders however disagreed on the idea of granting the 500 billion euros European Stability Mechanism (ESM) a banking licence to allow it to directly refinance member states.

Merkel said the measure was "not compatible with the EU treaties," while Monti stressed a banking licence for the ESM was "conceivable" in a broader context and in a longer-term perspective.

VietNamNet/Xinhuanet