(Bloomberg) -- 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 and stocks rose after Merkel and Interior Minister Horst Seehofer, her antagonist who had threatened to resign, ended their two-week standoff late Monday. The compromise -- which Merkel called “really good” -- averts a split of the alliance that’s governed Germany for most of the time since World War II, but its success could well depend on factors beyond Merkel’s control and it may prove only to be a temporary solution.
“There are many questions that are open,” particularly because the migrant relocation plan accepted by Merkel to halt the dispute requires cooperation by Italy and Austria, Holger Schmieding, chief economist at Berenberg, said in a Bloomberg Television interview.
The deal between Merkel’s Christian Democratic Union and Bavaria’s ruling Christian Social Union also requires support from the Social Democratic Party, Merkel’s junior coalition partner. Merkel will try to get the SPD on board with the compromise at a meeting Tuesday evening.
Ralf Stegner, a deputy SPD chairman, was scathing about the CDU-CSU dispute, saying it had caused “real damage” and “in the end only benefited right-wing populists.”
“The SPD is the only party doing professional government work at the moment, the others are entertaining the public with genuine hamming-it-up theater,” Stegner said in an interview with Deutschlandfunk radio. “It’s not as if we can just go back to daily business and everything is fine.”
Merkel and CSU leader Seehofer pulled back from the brink as they risked a coalition split that could have unraveled Merkel’s chancellorship after almost 13 years.
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 U.S. President Donald Trump, the U.K.’s exit from the European Union and rising populism across Europe. Merkel meets U.K. Prime Minister Theresa May and Hungary’s Viktor Orban on Thursday, before heading to a North Atlantic Treaty Organization summit with Trump next week in Brussels.
Merkel’s deal calls for setting up holding centers at the German border for refugees already registered in other EU 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 members to take back asylum seekers rejected by Germany.
Seehofer spoke by telephone with Austrian Chancellor Sebastian Kurz on Tuesday and said he also planned to speak to the Italian government, news agency DPA reported. Kurz said on Twitter that he wants a “swift explanation” from Germany and that Austria is ready to “react accordingly, especially at our southern border.”
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 a state election in October.
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.
Polls during the standoff suggested waning public support for the CSU’s stance and the regional leaders promoting it, while Merkel’s approval rating declined only slightly. Yet as German politicians head toward their summer recess, Merkel may only have won a temporary respite.
The CDU-CSU dispute clash created “only losers,” Michael Kellner, political general manager of the opposition Green party, said on Bloomberg Television. “It’s kind of a stalemate now, so it’s not very stable.”
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