Germany's Seehofer announces deal with Merkel, drops threat to quit

European Union leaders cried victory Friday claiming to have set aside major differences over how best to handle migrant arrivals. (AP Ph

"The cost of getting to this deal ended up being much higher than the benefit of the actual outcome", she said.

"If you include services like the digital services, then you have a completely different trade balance sheet with the U.S. showing a surplus against the European Union", she noted. "I have not studied it in detail but at first glance - and I have asked the legal services to look at it - it seems to me to be in line with the law", Juncker told a news conference in Strasbourg.

Sebastian Kurz, the anti-immigration chancellor of Austria, said that if the German government went ahead with the plan, he would take action to seal off Austria's southern borders with Italy and Slovenia. Talks between Merkel, the Christian Social Union and Social Democrats continued Tuesday evening.

As he entered a CDU crisis meeting yesterday, deputy leader Armin Laschet said the sister parties "want to hold onto" their alliance.

Despite the usual predictions of her demise, Angela Merkel is still standing-albeit weaker than ever before after a face-off with her nemesis, interior minister Horst Seehofer.

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Seehofer said on Tuesday that he had already discussed a possible solution with Kurz.

Sources said Seehofer had not yet submitted the resignation and that some in the party were attempting to change his mind over the decision.

Europe's political risk was a theme tempering market optimism throughout previous year.

"The CDU and CSU have now struck a deal they could have reached three years ago", it said, referring to the peak of the mass migrant influx in mid-2015. However, there has been a surge in departures from Libya of migrants trying to cross by sea to Italy. Under its new right-wing government, Austria also supported Mr. Seehofer.

The Austrian government, meanwhile, called for quick clarification of the German government's position and said it was prepared for all scenarios.

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Seehofer and Merkel have long had a hard relationship and sparred over Germany's approach to managing immigration on and off since 2015, when the chancellor welcomed refugees into the country.

At one stage, this political dispute looked like it might split the longstanding CDU/CSU partnership and, as a result, topple the grand coalition (GroKo) government between the CDU/CSU and the Social Democrats (SPD). They argued such zones would not limit the number of migrants given that most were fleeing wars in the Middle East and Afghanistan and therefore entitled to asylum in Germany.

Protege Annegret Kramp-Karrenbauer, CDU general-secretary, may eventually take over but analysts say her profile is too low for the CDU to back her and Jens Spahn, her biggest critic within the party, is not popular enough with voters. It can ill-afford to unnerve stability-loving Germans by rocking the coalition.

From the beginning, the challenge presented by the immigration crisis has been about more than just procedures and raw numbers (or as one resident of a small German town put it, "how do you integrate 150 refugees in Abensberg?").

But the German news agency dpa reported that Mr Seehofer told the meeting of CSU officials that he thinks the measures do not adequately accomplish his goals.

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