German voters have given Chancellor Angela Merkel a second term in today's national election and a mandate to form a new government with the business-friendly Free Democrats.

Her rival, Social Democrat Frank-Walter Steinmeier, conceded defeat as the result became clear.

Ms Merkel's coalition 'have a majority in the parliament and will be able to form a government,' Mr Steinmeier told dejected supporters after seeing support for his centre-left Social Democrats plunge by over 11 percentage points.

Preliminary results indicate that Ms Merkel's Christian Democrat Party will be able to ditch its coalition partners of the past four years, the centre-left Social Democrats, in favour of the Free Democrats.

'We have achieved our goal of gaining a stable majority for a new government,' a beaming Ms Merkel, Germany's first female leader , told cheering supporters in Berlin.

'I want to be the chancellor of all Germans, so that things improve for our country.'

The campaign was overshadowed by security concerns following a series of al-Qaeda messages warning Germany to pull its troops out of Afghanistan.

Ms Merkel emerged from obscurity four years ago to lead the male dominated and deeply conservative Christian Democrats.

At the time she was seen as a potential Margaret Thatcher promising painful reforms to Germany's stagnant labour market.

However, her agenda was seen as harsh and on the eve of the 2005 election her support evaporated.

The Christian Democrats won enough seats but they had to form a grand coalition with their rivals on the left, the Social Democrats.

This time around Angela Merkel ditched any talk of cuts in the public sector, preferring instead to focus on stability and in keeping people in jobs.

Her campaign was short on specifics and instead her handlers have concentrated on her role as a kind of mother figure in a time of crisis.