Berlin CNN  — 

German Chancellor Angela Merkel’s coalition government remains intact after she reached a deal Monday over the country’s migration policy, ending a political standoff with her interior minister.

Horst Seehofer, the leader of the Christian Social Union, or CSU, the Bavarian sister party of Merkel’s Christian Democrats, the CDU, was at a stalemate with Merkel over how the country should deal with asylum seekers arriving at the country’s southern borders.

Seehofer offered to quit as interior minister and as leader of the CSU during a marathon party meeting on Sunday, but was later persuaded by CSU colleagues to meet with Merkel one more time and attempt to resolve the disagreement, Reuters reported.

Late Monday, general secretaries of both parties said Germany will establish transit centers close to the border with Austria where asylum seekers already registered in another European Union country will be processed before being returned to that country where possible. Where that is not possible, the parties have agreed the asylum seekers will be sent back across the border to Austria.

Merkel called the agreement a “good compromise after tough negotiations and difficult days.” Returning migrants to the county where they first registered with the agreement of that nation preserved the EU’s “spirit of partnership,” Merkel said.

Seehofer said the deal ensured that he would hold his post as interior minister.

“I’m pleased we managed to get this agreement – it has shown again it’s worth fighting for something like this. Now we have a tenable clear agreement for the future.”

But neither Merkel nor Seehofer will be fully satisfied. Merkel has had to abandon her bid for bloc-wide deals in favor of bilateral arrangements, while Seehofer has conceded defeat on his goal to turn away all asylum seekers directly at the border who are already registered elsewhere.

The plans will also require the approval of the Social Democratic Party (SPD), which is the third party in Merkel’s coalition and favors a more liberal approach to migration. The party has not yet responded to the announcement.

Austrian government spokesman Peter Launsky said in a statement Tuesday that Austria was prepared to “take measures” to protect its southern borders if the proposals are implemented.

By preventing migrants from entering Austria from Italy, some of whom will then travel onward to Germany, the country could reduce the number of people pushed back across the Germany-Austria border under the new German plans.

Horst Seehofer speaks to journalists early Monday after late-night talks with the CSU leadership.

How did we get here?

The political crisis is one more sign of a growing rift in Europe between those who want to work together to reduce the number of migrants and refugees entering the bloc, and those who have grown tired of failed attempts to reach bloc-wide agreements and are taking unilateral action.

Seehofer, who repeatedly called for tougher policies on refugees, had given Merkel two weeks to reach an agreement with other EU leaders that would allow German police to reject asylum seekers at the border who are already registered in another country in the bloc. Under EU law, those people must be taken in and arrangements made on a case-by-case basis to send them back to the first country of entry.

Seehofer had threatened to implement that policy unilaterally if Merkel could not reach a satisfactory deal by Sunday. Instead, he reportedly offered to step down, a move that could have provided temporary respite for Merkel but might have meant the end of the decades-old CDU/CSU alliance and the coalition government.

Speaking ahead of an EU summit last week, Merkel – a staunch advocate of EU-wide solutions – said migration could be a “make or break” issue for the union.

Europe’s leaders emerged from talks with a bloc-wide agreement that it was best to deal with the issue collectively rather than unilaterally. But the wording was vague and nations will participate in relocation and resettlement programs only on a voluntary basis.

Speaking at his party’s annual gathering Sunday, Matteo Salvini, Italy’s interior minister and leader of the anti-immigrant League Party, said he wanted to create a pan-European association of like-minded parties, Reuters reported, a further indication that nationalist forces are gaining strength.

Merkel insisted the EU-wide deal reached on Friday was a victory, but Seehofer’s party was not so sure. The CSU is fighting state elections in Bavaria in October and, under pressure from the far-right, anti-immigrant Alternative for Germany, or AfD, is seeking to burnish its own anti-refugee credentials in an attempt to win back voters.

Merkel and Seehofer had long battled over the right approach to migration, but seemed to reach an agreement after federal elections last year when the Chancellor agreed to try to limit the number of refugees arriving in Germany each year to 200,000 – a policy that Seehofer had repeatedly demanded and Merkel had consistently rejected.

The latest flareup was triggered when Seehofer announced a 63-point “migration master plan” last month, which Merkel refused to endorse due to the proposal to reject asylum seekers already registered elsewhere. Merkel agrees that the current rules – known as the Dublin regulation – must be reformed, but insists that must be done at the European level.

Nadine Schmidt reported from Berlin and Judith Vonberg wrote in London. CNN’s Atika Shubert contributed to this report.