Merkel and Macron propose eurozone budget

Chancellor Merkel's Coalition is at risk after clashes with her Interior Minister Horst Seehofer over Germany's refugee policy

The decision sparked some opposition, most recently in the form of Interior Minister Horst Seehofer's open challenge to the policy, and a public poll showing 62 percent of Germans want to turn away asylum-seekers at the border.

Italy forged ahead with plans to send hundreds of migrants to Spain in a small naval convoy on Tuesday (12 June) after shutting its own ports to them, sparking a war of words with France that exposed European Union tensions over immigration.

Wading into the crisis, Trump tweeted: "The people of Germany are turning against their leadership as migration is rocking the already tenuous Berlin coalition".

Merkel said eurozone reform was the toughest issue in their talks at her Meseberg retreat outside Berlin, where they also touched on European foreign and defence policy and immigration.

A last-minute reprieve gives Merkel until July 1 to convince fellow European leaders to come up with a comprehensive policy to seal Europe's borders to unbridled migration.

"Italian borders are European borders".

"We must speak the truth".

The EU could take steps to stop asylum seekers moving on from the country in which they are registered and start deciding asylum requests at centres to be established beyond EU borders in the future, according to a draft summit statement.

Her Christian Democratic Union (CDU) and its sister party CSU have suffered heavy losses in the country's federal elections previous year, while the far-right Alternative for Germany (AfD) scored record gains and entered the parliament for the first time.

While several high-profile Republicans have broken with the administration the policy, urging an about-face, none have yet called for the Homeland Security chief's resignation.

By contrast, Merkel has warned of a resulting domino effect as Germany's neighbors rush to shutter their internal Schengen borders and is calling for a joint European solution to the "refugee crisis" to be reached within the next two weeks.

"I can not say that we have a grip on the issue", he told a press conference after huddling with top brass of his CSU party.

Otherwise, Berlin would introduce right after the summit a unilateral ban on refugees already registered in other EU states, said the junior governing Christian Social Union, which holds the interior ministry.

"In essence, that is a scandal", he said, promising to reverse the practice immediately.

Seehofer's remarks don't come as a surprise: His CSU faces a tight election in the German state of Bavaria.

The declaration highlighted the success of 2016 EU-Turkey deal in countering irregular refugee flows, and suggested developing cooperation and partnerships with origin and transit countries to avoid departures to Europe and fight illegal migration. On Monday, reports emerged that Seehofer has agreed to give Merkel two weeks to come up with a solution, but the situation is still highly concerning for investors already anxious about politics in the European region. Seehofer entered Merkel's government as the interior minister, promising a "master plan" to tackle migration. She has insisted that any response must be coordinated with other European Union nations.

Reuters reported that Merkel was asked about Trump's inaccurate claim during a news conference with French President Emmanuel Macron. She said it will then have to consider what happens next.

But the chancellor may have no choice, given Seehofer's vow to launch the nuclear option of shutting Germany's borders in defiance of her - an act of rebellion which would force his sacking.

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