The third party in Angela Merkel's coalition is resisting moves for migrant processing camps - a plan the German chancellor hoped could save her government.

Merkel's Christian Democrats (CDU) and their CSU allies had agreed to set up special transit centres at the border with Austria.

The plan, aimed at ending a dispute between the two parties, would see refugees already registered in other EU countries held in the centres and then sent back to the countries where they had registered first.

But it has since emerged that the third member of the coalition, the Social Democrats, are sceptical of the idea and want more talks to make the proposal work.

Further dispute could put the future of Merkel's three-month government under threat with the CSU demanding action to solve Europe's migrant crisis.

The third party in Angela Merkel's coalition is resisting moves for migrant processing camps - a plan the German chancellor (pictured today) hoped could save her government

Merkel's Christian Democrats (CDU) and their CSU allies had agreed to set up special transit centres at the border with Austria. The German Chancellor is pictured with Interior Minister Horst Seehofer of the CSU

Merkel is pictured with German Minister of Finance Olaf Scholz, from her coalition partners, the Social Democratic Party

A Forsa poll this morning showed a majority of Germans are unhappy about the agreement.

Merkel needs the backing of both her junior coalition partner and fellow European Union states if the plan to limit the number of asylum seekers arriving in Europe's most prosperous economy is to succeed.

But leaders of the three parties in Merkel's governing coalition failed to reach an agreement on Tuesday evening during a two-and-a-half-hour meeting in the German chancellery.

'We were able to make progress, but we have not found common ground yet,' Social Democratic (SPD) leader Andrea Nahles said, adding that all three parties agreed to meet again on Thursday evening.

Olaf Scholz, Vice Chancellor and Finance Minister from the SPD, said more time was needed to translate the conservatives' migration proposal into a set of 'reasonable rules'.

Merkel's Christian Democrats (CDU) and their long-time Bavarian Christian Social Union (CSU) allies agreed on Monday to set up special transit centres at the border with Austria where migrants already registered in other EU countries will be held and then sent back to the countries where they had registered first.

The dispute underlined the deep divisions lingering within Europe on how to deal with the migrants who have arrived in the last three years. Pictured: Migrants on a rescue ship in the Mediterranean earlier this week

The plan appeared to settle a dispute between the two conservative parties that had threatened Merkel's three-month-old government. But a Forsa poll on Tuesday showed a majority of Germans to be unhappy about the agreement.

The Social Democrats, who rejected a similar plan three years ago, withheld their immediate consent and EU states must also agree to take migrants back.

Earlier on Tuesday, Nahles said the plan was worthless without bilateral deals with countries such as Italy and Austria, from which most of the migrants reaching Germany come.

'We have many open questions,' said Nahles, whose lawmakers discussed the deal on Tuesday. Securing the consent of other EU countries was crucial, she said, adding: 'That's why I consider the deal for now as an uncovered cheque.'

Lars Klingbeil, secretary general of the centre-left party, stopped short of rejecting the deal but told the Rheinische Post newspaper: 'Our resolution stands: We don't want closed camps.'

However, European Commission chief Jean-Claude Juncker responded positively to the deal. 'I have not studied it in detail but at first glance - and I have asked the legal services to look at it - it seems to me to be in line with the law,' Juncker told a news conference in Strasbourg.

Members of the Libyan Red Crescent recover the body of a drowned migrant off the coast of Tajoura, east of the capital Tripoli, yesterday

Austria, the main entry point for migrants into Germany, said it would take measures to protect its own southern borders if Berlin went ahead with the transit zones. It fears that tighter border controls by its northern neighbour could raise the number of migrants on its own soil.

The new policy is a compromise that allowed Merkel and CSU head Horst Seehofer to defuse their confrontation.

Seehofer, who is also German interior minister and wanted tighter national border controls had threatened to resign, then delayed a decision and now says he will remain in the cabinet.

He said he had spoken to Austrian Chancellor Sebastian Kurz by phone. 'I have the impression that he is interested in a sensible solution,' Seehofer said before a party meeting.

The Austrian chancellery confirmed that Seehofer would meet Kurz and his far-right counterpart Herbert Kickl on Thursday.

Seehofer also spoke with his Italian counterpart Matteo Salvini, leader of Italy's far-right League, by phone and both agreed to meet for bilateral talks before a summit of interior ministers in Innsbruck, Austria on July 11.

The Forsa poll showed 54 percent would have favoured a CDU-CSU split over the migration question while 38 percent welcomed the agreement and the unity of the two sister parties.

More than two-thirds said Seehofer should have resigned as interior minister while only one out of four respondents welcomed his decision to stay in office.

Austrian chancellor Sebastian Kurz (pictured) is set to meet Germany's interior minister Horst Seehofer tomorrow

The dispute underlined the deep divisions lingering within Europe on how to deal with the migrants who have arrived in the last three years.

Numbers are sharply down from the peak three years ago. However, there has been a surge in departures from Libya of migrants trying to cross by sea to Italy.

The idea of setting up centres at the border with Austria to process migrants is not new. At the height of the record influx of migrants in 2015, Merkel agreed to a CSU proposal to establish transit zones at the border to filter out migrants who have little chance of gaining asylum.

The plan was dropped after opposition from the Social Democrats. They argued such zones would not limit the number of migrants given that most were fleeing wars in the Middle East and Afghanistan and therefore entitled to asylum in Germany.

However, there seems to be little appetite among SPD leaders to oppose the plan this time and trigger another crisis.

Some Social Democrats accuse the CSU of wanting to appear tough on immigration before a regional election in Bavaria in October where the conservatives are expected to lose voters to the anti-immigrant Alternative for Germany party.

About 68,000 people applied for asylum in Germany in the first five months of this year, compared with a record of 745,500 in the whole of 2016. About 18,000 had already applied for asylum in another EU country.