Chancellor Angela Merkel's conservatives are in danger of being ousted from power in another German state after the opposition Social Democrats (SPD) said they wanted to form a three-way coalition with two smaller centre-left parties.
The Christian Democrats' (CDU) vote fell to 31%, their worst result in the state since 1950, but they were still just the largest party in the rural region between the Baltic and North Seas, a projection by Germany's ARD TV network showed.
The SPD, which won 29.9% in the northernmost state, said it wanted to form a coalition with the Greens and South Schleswig Party (SSW) that represents the ethnic Danish minority.
The three parties would have 35 seats in the 69-seat state assembly.
Dr Merkel's conservatives have been voted out of power in three states in the past two years. If knocked out in the traditionally conservative region of Schleswig-Holstein the CDU would rule just seven of Germany's 16 states ahead of the 2013 federal election, when Dr Merkel is seeking a third term.
"She'll probably lose another state premier and this will make things harder for her re-election campaign," said Gero Neugebauer, political scientist at Berlin's Free University.
"She can't be satisfied about the performance of her centre-right coalition."
Meanwhile, Italians are voting in local elections where the vote is viewed to be the first insight into Prime Minister Mario Monti's increasingly unpopular austerity policies since his appointment last year.
Mr Monti himself is not in the race, but the two main parties which support his technocrat government in parliament will go before voters.
Both the centre-right PDL and the centre-left PD are jockeying for position ahead of the 2013 vote.
An increasingly sceptical electorate has been bitterly resentful of tax hikes imposed by the Monti government.
More than 9m Italians, or nearly 20% of the total electorate, are eligible to vote in the elections in around 900 towns across Italy, including important provincial centres like Palermo, Genoa and Verona.
An opinion poll on Friday showed the PD leading the PDL, but more than 38% of respondents were either undecided or ready to abstain.
