The coalition government of German Chancellor Angela Merkel averted a potential collapse after striking a last-minute deal with Interior Minister Horst Seehofer over the country's policy toward illegal immigration.

Seehofer, who had discussed stepping down unless border controls were tightened, said he and Merkel have agreed on a solution to stop illegal immigration at the Germany-Austria border, public international broadcaster Deutsche Welle reported.

The interior chief said he will remain in his post, according to the report. His resignation could have shattered the governing alliance between his Christian Social Union party and Merkel's Christian Democratic Union.

Under the agreement, the two parties will set up transit centers at the Germany-Austria border for asylum seekers registered in another EU country. From the centers, asylum seekers will then be sent back to responsible countries, the report said.

"This (deal) preserves the spirit of partnership in the European Union and at the same time is a decisive step towards organizing and controlling secondary migration," Deutsche Welle quoted Merkel as saying.

Deutsche Welle said it was still unclear whether the Social Democratic Party — also part of the coalition government — will accept the compromise. The group was meeting with the two other parties.