Germany’s domestic intelligence chief has been forced to step down after he provoked controversy by questioning the authenticity of video footage showing far-right protesters in Chemnitz chasing down migrants and appearing to downplay the violence.

The removal of Hans-Georg Maaßen, the head of the Federal Office for the Protection of the Constitution (BfV), followed more than a week of political clashes that revealed deep fissures in Angela Merkel’s coalition.

After an extended crisis meeting between party leaders on Tuesday afternoon, a statement from the German government said Maaßen would be taking up a new role as senior official in the interior ministry. His successor at the BfV has not yet been announced.

Calls for Maaßen to quit had abounded after he questioned the authenticity of video footage from Chemnitz in comments to the tabloid Bild and expressed doubts that the migrants were chased down. It directly contradicted Merkel’s description of a far-right protest in the eastern town, who said they “very clearly revealed hate”. Her spokesman referred to the scenes as a Hetzjagd, or hounding of migrants.

Play Video 0:30 The video questioned by German security chief – video

The remarks also chimed with comments by the anti-immigrant AfD’s co-leader, Alexander Gauland, who accused Merkel of spreading fake news on Chemnitz.

Her coalition partners had taken opposite views on Maaßen. The truculent interior minister, Horst Seehofer, who heads the Bavarian-based Christian Social Union (CSU), had thrown his weight behind Maaßen, while the leftwing Social Democrats (SPD), were determined to get rid of him.

The decision to offer him a new job represents a way of saving face for those in the three-way meeting.

“Mr Maaßen will become state secretary in the federal ministry of the interior in the future,” the statement said. “Interior minister Horst Seehofer values his competence in matters of public security, but Mr Maaßen will not be responsible for the supervision of the Federal Office for the Protection of the Constitution in the ministry.”

German media pointed out that he is effectively being promoted: as state secretary, he will belong to a pay higher grade.

The news sparked outrage among opposition politicians. The leader of the Green party, Katrin Göring-Eckardt, described the development as “unbelievable” and criticised the coalition for rewarding “disloyal behaviour and cuddling with the AfD”.

Facebook Twitter Pinterest The German interior minister, Horst Seehofer, meets the chancellor, Angela Merkel, to discuss Hans-Georg Maaßen. Photograph: Omer Messinger/EPA

The parliamentary leader of the far-left Die Linke, Dietmar Bartsch, said Maaßen’s removal from the BfV was welcome but described his new job as “a farce”.

The row has been viewed in Germany as a reflection of the chancellor’s weakened position with commentators suggesting she would have swiftly shown him the door a few years ago.

Both Merkel and Seehofer have insisted that the coalition government would not crumble over the spat. But the long-running debate has pressed the pause button on German politics and shown the deep divisions within Germany on immigration following the chancellor’s 2015 open door to Syrian refugees.

It is the second time in months that immigration issue has sparked a clash between Seehofer and Merkel and shaken the uneasy German coalition. In July, Merkel managed to strike a truce with her interior minister, ending weeks of conflict over Seehofer’s call for tougher border policies.

Maaßen became Germany’s top domestic spy six years ago, when his predecessor, Heinz Fromm, took early retirement after a scandal involving destroyed documents on the National Socialist Underground neo-Nazi cell that murdered 10 people, mostly immigrants.

He was the agency’s 13th head since it was created in 1950 and one of a number who left the post earlier than planned. These include the first BfV head, Otto John, who caused a scandal by moving to East Germany, either because he defected or was kidnapped, and Hubert Schrübbers who was pushed into early retirement in 1972 because of his Nazi links.

Maaßen’s Chemnitz remarks have fanned suspicions that some elements of the German establishment are turning a blind eye to the resurgent far-right. Scenes of xenophobic chants, aggression and illegal Nazi salutes were reported in Chemnitz and filmed by many witnesses, triggering outrage in Germany and beyond.

The Chemnitz affair is not the first time Maaßen has been accused of taking a soft line on the far-right. This year saw the publication of Inside AfD, an exposé by former party member Franziska Schreiber, who claimed he met the then leader Frauke Petry. Maaßen has since acknowledged having met Petry but denied giving her advice.

The BfV was again on the defensive last week, denying a report by public broadcaster ARD that Maaßen had informed an AfD lawmaker about sections of a report from his agency ahead of its publication.