Merkel party faces state election loss in Hamburg

HAMBURG (Reuters) - German Chancellor Angela Merkel's Christian Democrats face a bruising defeat in a state election in Hamburg Sunday to the opposition Social Democrats (SPD), which would make it harder for her coalition to pass laws.

The election in Hamburg is the first test for Merkel this year. The SPD, riding high in opinion polls, is hoping a big win there can give the centre-left a burst of momentum ahead of six further state elections in 2010.

Defeat in the prosperous port city would make life harder for Merkel's centre-right government because the opposition would have firm control of the Bundesrat, or upper house of parliament. It has to approve about half of the legislation that passes through the Bundestag, or lower house.

The first exit polls are expected at 1800 (5 p.m. British time).

Hamburg will send a signal to voters before the other state votes, especially in the southwestern region of Baden-Wuerttemberg where Merkel's CDU is in danger of losing power in March.

Opinion polls in Hamburg show the SPD projected to win about 46 percent of the vote. The CDU, which won 42.6 percent in the last election in 2008, has plunged to 25 percent.

The SPD hopes to win an outright majority. But it may need to form a coalition with the Greens, who are polling around 14 percent. The Left party are at 6 percent and the liberal Free Democrats at 5 percent.

Hamburg, long a left-wing bastion, was ruled by the SPD for 44 years before it lost power to Merkel's CDU 10 years ago. The SPD's candidate, former Labour Minister Olaf Scholz, has purged the party of corrupt officials who cost it control of Germany's second city.

Scholz, 52, told Reuters in a recent interview that voters were returning to the SPD because of its focus on pro-economic growth policies and fiscal prudence. He put the economy and debt reduction at the heart of his campaign.

Analysts believe the SPD nationally might get a short-term boost with a second consecutive state election victory following their win in North Rhine-Westphalia last May. But it is unlikely losing Hamburg would have a lasting impact on Merkel's party.

The CDU plunged in Hamburg polls after its leader Christoph Ahlhaus, a colourless lawyer, took over from once-popular CDU mayor Ole von Beust, who abruptly quit in July. A CDU coalition with the Greens failed in November, prompting the elections.

Nationally, Merkel's conservatives are at about 36 percent. The SPD (22 percent) and their preferred partners, the Greens (20 percent), are just ahead of the ruling coalition of Merkel's conservatives and their FDP partners (5 percent).

(Writing by Erik Kirschbaum; editing by Mark Trevelyan)

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