German Chancellor Angela Merkel's conservative-led coalition is in a dead heat with Germany's centre-left opposition in a state election regarded as a major test ahead of a national vote later this year.

Lower Saxony, a region of eight million people in northwestern Germany, has been run for the past decade by a coalition of Ms Merkel's conservative Christian Democratic Union and the pro-market Free Democrats, the same parties that form the national government.

Ms Merkel, 58, will seek a third four-year term in a parliamentary election expected in September.

She and her party are riding high in the polls, but the opposition hopes the Lower Saxony vote will show that she is vulnerable.

Projections for ARD and ZDF television, based on exit polls and partial counting, showed Ms Merkel's CDU winning just over 36% in an election for a new state legislature in Lower Saxony and the Free Democrats getting about 10%.

The opposition Social Democrats and Greens - who hope to oust them from the regional government - had support of about 32.5% and 13.5% respectively, according to the projections.

Before the election, the question had been whether the Free Democrats, whose support has eroded badly since they joined Merkel's national government in 2009, would win the 5% needed to gain seats in the state legislature.

Polls over recent months had suggested that they might not.

But tactical voting by supporters of Ms Merkel's conservatives, who polled more than 42% in Lower Saxony's last election in 2008, appeared to have saved the Free Democrats.

That may calm intense speculation over whether the Free Democrats would force out their leader, Vice Chancellor Philipp Roesler, whose home state is Lower Saxony.

He proclaimed Sunday "a great day" for his party.

Merkel and her party have been bolstered nationally by a relatively robust economy, low unemployment and the chancellor's hard-nosed handling of Europe's debt crisis. The Free Democrats, meanwhile, have taken much of the blame for frequent government infighting.