Merkel faces crisis as interior minister offers to resign over migration battle

Germany's political landscape has become clouded by uncertainty after the country’s interior minister, Horst Seehofer, tendered his resignation after a showdown with Chancellor Angela Merkel over immigration.

Seehofer, who is also the leader of the Christian Social Union, on Sunday night reportedly offered to step down from his post in the German government over Merkel’s handling of the migration issue with fellow European Union leaders in Brussels.

Last week, EU leaders agreed on measures to help Mediterranean countries that were struggling with the inflow of migrants.

Merkel had also tabled her own draft version of a plan to tighten authorities' control over Germany's borders and presented it to the governing coalition, including officials from her own CDU and others from its Bavarian sister party, the CSU.

The interior minister had threatened to unilaterally - and against Merkel's instructions - take steps to turn away asylum seekers at the German border.

Merkel fears that if Germany were to close its borders it might set off a chain reaction across the Continent that could damage the border-free travel zone.

The Chancellor said she had struck deals with 16 other countries for them to take back already-registered asylum seekers; but some European nations including Poland, Hungary, the Czech Republic and Slovakia denied having been approached.

It was still also unclear whether the minister would finally resign in protest or not, with the CSU having scheduled a press conference for Monday after Seehofer agreed to meet again with Merkel before taking a final decision.

Investors were concerned that if he did finally choose to resign, then that could pave the way for a more right-wing candidate to take his place in the post, risking leaving Merkel with only a minority government and possibly threatening the historic coalition between CDU and CSU as well.

David Madden market analyst at CMC Markets UK believed the German situation has weighed on sentiment in Europe: "Uncertainty regarding German politics is playing into the decline, as Angela Merkel is at loggerheads with Horst Seehofer over immigration. Traders are nervous that this issue could bring down Mrs Merkel."

Jasper Lawler, analyst at London Capital Group, also said the euro could be negatively affected due to these political concerns.