BERLIN, Jan 3 (Reuters) – German Chancellor Angela Merkel’s allies in Bavaria stepped up criticism of her open-door refugee policy on Sunday, with their leader demanding a cap of 200,000 migrants a year, about a fifth of last year’s level.

Merkel faces splits in her conservative bloc and coalition with the Social Democrats (SPD) over her insistence that Germany can cope with the refugee crisis as towns struggle to house migrants, many having fled war in the Middle East and Africa.

Horst Seehofer, the combative leader of the conservative Christian Social Union (CSU) in Bavaria, where most migrants arriving via the Balkans enter Germany, told Bild am Sonntag it was possible to integrate up to 200,000 asylum seekers and refugees a year.

“Anything more than that, I think is too much,” he told the paper. “The central goal for 2016 must be to limit the number of migrants. We are at the moment a long way from this goal.”

Seehofer hosts Merkel and British Prime Minister David Cameron at a meeting of his CSU party this week in the remote resort of Wildbad Kreuth and refugees will be a big topic.

A magnet for migrants partly due to generous social benefits, Europe’s biggest economy is taking in more than any other EU state. It registered 1.09 million migrants last year, a newspaper reported last week.

The CSU has long called for a cap and has repeatedly threatened to take action, such as sending refugees back to other countries. So far it has not acted on those threats and towards the end of last year, Seehofer’s tone had softened.

The CSU chief also warned that Germany’s budget goals were at risk if migrants kept arriving at the same rate.

Finance Minister Wolfgang Schaeuble aims for a balanced budget this year. “If the refugee numbers stay at 2015 levels, a budget with no new borrowing is hardly do-able,” Seehofer said.

Merkel, whose popularity has waned due to the refugee crisis before five regional elections this year, has rejected a cap but in a nod to her critics, she told her Christian Democrat (CDU) party last month that the number of migrants would fall.

The SPD said Seehofer’s remark exposed conservative rifts.

“Angela Merkel and Horst Seehofer must reach agreement within the conservative camp. Their row is unsettling people,” said SPD General Secretary Katrina Barley. (Reporting by Madeline Chambers; editing by Ralph Boulton)