Analysts at Brown Brothers Harriman explained that German Chancellor Merkel was right. "As the Greek crisis was winding down last summer, she noted that the refugee problem would be even more difficult. And indeed, it is." Key Quotes: "The refugee issue is challenging Merkel's leadership in Europe. While her trademark has been her sensitivity to swings in sentiment, she has seemed rather tone-deaf in dealing with the refugee crisis. Her move this week suggests she is still out of step with many of her European allies. Reports suggest that Merkel struck a deal with Turkey without the consent of others. Turkey realizes that it is the key to Europe's strategy. Europe needs to control its external borders if it is going to be able to allow free movement within the region. Many top European officials see the free-movement within the region as essential to European integration. Without it, some fear that the EU faces an existential crisis. Turkey has its own agenda. It needs funds to meet the needs of its refugees. It previously asked for three bln euros and this week has asked for another three bln euros. However, what Turkey wants is to be part of Europe, despite being shunned for years. Turkey has demanded that its citizen can enter the EU without a visa. This is controversial on substantive grounds. Procedurally, one of the challenges is the Turkish passports are reportedly easy to forge. Turkey also wants to accelerate negotiations on EU entry. These negotiations are broken down into areas, and Turkey has requested beginning talks on five chapters. Turkey is a large, relatively poor country, and many, while explicit about it, may be concerned about its largely Islamic population. In recent years, human rights issues have become more salient, and Turkey's treatment of journalists is notorious. The initial deal closed the western Balkan migration route, and Turkey agreed to take back all non-Syrian migrants. However, Merkel had a bigger vision: return every migrant reaching the Greece. Turkey recognized the greater demand and raised its price of cooperation.It looks like the final compromise was that all migrants would be sent back to Turkey. Turkey would get "credit" for each Syrian refugee it took back from Greece and would get to send one back to the EU. It appears the respect for rules that German leaders often espouse may be jettisoned for political expediency. The UN recognizes the human right to seek asylum. The German plan seems to contravene this right. Some fear that Merkel reached an agreement with Turkey without others consent, delivering a sort of fait accompli. Separately, last week, the European Court of Justice ruled against German efforts to spread the welfare costs of across the country to force refugees into certain areas. The Court ruled that under certain circumstances the government can impose residency requirements to facilitate integration. German policy is partly aimed at preventing the formation of refugee ghettos. Reports indicate the refugees are directed to a rural area and the east, where housing is more available, and there is a death of working age people. Merkel's domestic considerations may have also driven her to seek a bigger solution. This weekend three German states with a combined population of 12 mln people will elect new state governments. Each state has its own particular coalition. In Baden-Wurttemberg, the Greens head up a coalition with the SPD. In Rhineland-Palatinate, the SPD leads a coalition with the Greens. In Saxony-Anhalt, the CDU leads a coalition with the SPD, like on the federal level. The German political spectrum appears to have shifted to the right. The economic challenges in EMU and the refugee crisis appears to be the impetus. The anti-EU AfD party has morphed into a vocal anti-immigrant party, and may be the big winner in the weekend elections. It appears likely that the AfD will be secure sufficient votes to allow it to have parliamentary representation in the local government. More importantly, it will be seen as a signal for the national contest next year." For more information, read our latest forex news.