Berlin: German chancellor Angela Merkel halted the immediate threat of a government breakup in Europe’s biggest economy, crafting a plan to tighten migration and keep her Bavarian sister party in the fold.

The euro rose after Merkel and interior minister Horst Seehofer, her antagonist who had threatened to resign, ended their two-week standoff late on Monday. While the compromise averts a split of the two-party bloc that’s governed Germany for most of the time since World War II, its success could well depend on factors beyond Merkel’s control and it may prove only to be a temporary solution.

“This provides a break, but it’s not the end of the infighting," said Carsten Nickel, an analyst at Teneo Intelligence in London. The conflict’s political driving forces, including a state election in Bavaria in October, “will remain with us for months to come," he said.

Merkel and Seehofer, who heads Bavaria’s ruling Christian Social Union (CSU), pulled back from the brink as they risked a coalition split that could have unraveled Merkel’s chancellorship after almost 13 years. Seehofer is staying on as interior minister, a post that gives him federal border enforcement powers.

“After a tough struggle and some difficult days, we’ve found a really good compromise," said Merkel, who heads the Christian Democratic Union (CDU).

Trump ahead

For the moment, the truce clears an obstacle that was eroding the chancellor’s authority at a time when her challenges include a trade conflict with US President Donald Trump, the UK’s exit from the European Union and rising populism across Europe. Merkel meets UK Prime Minister Theresa May and Hungary’s Viktor Orban on Thursday, before heading to a North Atlantic Treaty Organization (NATO) summit with Trump next week.

Merkel’s deal calls for setting up holding centres at the German border for refugees already registered in other European Union countries. It’s meant to dovetail with a migration pact reached by the bloc’s leaders last week under pressure from the CSU, which includes pledges by some EU countries to take back asylum seekers rejected by Germany.

“We have agreed a new regime on the German-Austrian border that means we can prevent asylum seekers, whose asylum process is the responsibility of other EU nations, from entering the country," the CDU-CSU said in a joint statement.

‘Painfully missed’

The deal also requires support from the Social Democrats, the third party in Merkel’s government. Its leader, Andrea Nahles, said the party will closely examine the agreement. The SPD is set to meet to discuss the matter Tuesday evening.

“We think this is good because now we are getting back down to business," Nahles said after a meeting of coalition leaders in the chancellery. “That’s something we’ve painfully missed in recent weeks."

The upshot is that Merkel “depends on multiple third parties" to keep the Bavarians on board, Nickel said.

Bavaria became a migration flashpoint during Europe’s refugee crisis in 2015 and 2016 as the main entry route to Germany. Gains by the populist Alternative for Germany have returned the topic to the CSU’s agenda ahead of the state election.

Infighting began after Seehofer pledged to send back asylum seekers at Germany’s border if they’re already registered in another EU country. Merkel rejected that proposal as a unilateral move that violated European asylum law and risked causing havoc with other EU governments.

‘Biggest loser’

Polls suggest that public support is waning for the CSU’s stance and the regional leaders promoting it. Last week, an FG Wahlen survey said 91% favour European solutions on migration, an endorsement of Merkel’s line and a snub to Bavaria’s nationalist push for unilateral border measures.

The brinkmanship and party leader Seehofer’s on-again, off-again threat to quit make the CSU “the biggest loser in this home-made drama" said Famke Krumbmueller, an analyst at political-risk consultancy OpenCitiz.

“The cost of getting to this deal ended up being much higher than the benefit of the actual outcome," she said. “The local electorate in Bavaria is not likely to reward the CSU’s show of the past few days."

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