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(Releads with Merkel comments)
BERLIN, Dec 5 (Reuters) - German Chancellor Angela Merkel said on Monday she was saddened by Italian Prime Minister Matteo Renzi's defeat in a referendum on constitutional reform that she supported, adding that the vote was a domestic matter that must be respected.
Many investors are looking to Merkel for leadership in Europe, fearing instability could reignite a sovereign debt crisis at a time when the EU is struggling with Britain's decision to leave and support for populist or right-wing parties is on the rise.
"I am sad that the referendum in Italy did not turn out as the prime minister wished because I always supported his reform policies but it is of course a domestic Italian decision that we must respect," Merkel told reporters in the city of Essen where her conservatives are holding a party congress.
Earlier, government spokesman Steffen Seibert said the chancellor had taken note of Renzi's decision to step down after the referendum with regret.
Seibert said Merkel had a good relationship with Renzi, marked by deep trust.
"The German government will offer close cooperation in friendship and partnership with the successor government in Italy, whatever it looks like," Seibert added at a government news conference.
He declined to draw any parallels between the Italian referendum result and the Brexit vote in June and the election in the United States of Donald Trump as the next President.
Foreign Minister Frank-Walter Steinmeier, a member of the Social Democrats (SPD) who share power with Merkel's conservatives, was more blunt, saying he was disappointed by the Italian result.
"This is a government crisis, not a state crisis. It is not the demise of the Western world but it is not a positive contribution in the midst of our crisis situation in Europe," he said through a spokeswoman. (Reporting by Madeline Chambers, Joseph Nasr and Michelle Martin; Editing by Jeremy Gaunt)