HANOVER (Reuters) - Angela Merkel's coalition and the centre-left opposition were level in exit polls in a state election on Sunday, which threatened to deprive the German chancellor of a boost for her bid to win a third term in office later this year.
In exit polls released after voting ended, Merkel's Christian Democrats (CDU) remained the biggest party in the swing state of Lower Saxony with 36 percent. The chief victors of the evening, however, appeared to be their Free Democrat (FDP) allies who defied doomsayers to win 10 percent.
But the Social Democrats (SPD) and Greens were also at 46 percent in exit polls. Victory in Lower Saxony would boost their chances of unseating Merkel in September's national elections despite a poor start by the SPD challenger Peer Steinbrueck.
"It's a neck-and-neck race and no one knows yet who will be the victor at the end of the night," said SPD candidate Stephan Weil, the mayor of state capital Hanover.
Neither of the two main parties needed success in Lower Saxony as much as the liberal FDP, whose very survival in the local and national parliaments has been in doubt as they have polled under the 5 percent threshold for seats in either assembly.
Their projected result was twice that high and the song "Walking on Sunshine" blared from speakers at their election HQ in Hanover. As well as giving hapless FDP leader Philipp Roesler a reprieve, it may give Merkel a chance of repeating the centre-right alliance for a third term rather than resorting to a "grand coalition" with the SPD, as she did from 2005-2009.
But that may have been at the cost of a decisive CDU result, as her loyal Lower Saxony state premier, the half-Scottish David McAllister, was believed to have tacitly encouraged supporters to split their ballot to save the CDU's junior coalition ally.
The result in Lower Saxony could also decide the fate of the SPD challenger for chancellor, Peer Steinbrueck, whose gaffes and unpopularity have been blamed for his party losing its once-commanding 13-point lead in the state.
The close contest turned Germany's fourth most populous state, which is the size of the Netherlands and stretches from the Dutch border to the former East Germany, into an election battleground watched by the whole country.
"The winds in Lower Saxony have turned and you can feel that everywhere you go," McAllister said during the final campaigning in which Merkel made seven personal appearances.
The CDU suffered setbacks in the previous 12 state elections and has lost four states to the SPD. The party's plight has stood in stark contrast to Merkel's own high approval ratings, which have been boosted by her leadership role in the euro crisis, when she is perceived to have defended Germany's economic interests.
The euro zone debt crisis did not play much of a role in the state vote, where the issues were local ones such as education, infrastructure and state spending in a state which is Germany's industrial and farming heartland.
The 42-year-old McAllister, son of soldier from Scotland who came to Germany with the British army, has been talked about as a potential successor to Merkel on the strength of his feisty campaign in a state with 6.2 million eligible voters.
"The CDU is doing a good job," said Peter Pietschmann, 68, a retired lathe operator, outside a polling station in the snow-covered state capital, Hanover. "Merkel's leading the country well, better than the SPD could."
Wolfgang Rausch, 56, a master craftsman split his two ballots between the CDU and FDP - the first for his constituency candidate, the second for his chosen party.
"The CDU and FDP are better for Lower Saxony," said Rausch, an independent businessman. "The CDU is doing a terrific job."
(Reporting by Erik Kirschbaum; Additional reporting by Alexandra Hudson; Writing by Stephen Brown; editing by Ralph Boulton)