BERLIN (Reuters) – Europe’s onerous bailout deal for Cyprus has burnished Angela Merkel’s reputation as a tough defender of German interests and removed one of the biggest threats to her re-election prospects half a year before voters go to the polls.

But the agreement, struck in the early morning hours of Monday in Brussels, comes at a price. It is likely to fan resentment in southern Europe over Germany’s bitter reform medicine and may ultimately increase the risk of backsliding by a reluctant government in Nicosia.