By Alexandra Hudson
BERLIN (Reuters) - Angela Merkel's conservatives face a struggle to retain power in Germany's windswept north this Sunday, knowing a defeat in Schleswig-Holstein's state election could give vital momentum to the opposition and dent the chancellor's 2013 re-election hopes.
Merkel's calm, resolute stance through the dramas of the euro zone crisis has left her personal popularity intact. But her national centre-right coalition is in jeopardy after a slump in public support for her junior coalition partners, the Free Democrats (FDP), due to their infighting and crotchety leaders.
To have any chance of fulfilling her hopes for a third-term in power, the chancellor must find new allies for her Christian Democrats (CDU) and hope a dismal run at regional level for both her party and the FDP is at an end.
"The Chancellor is going to have to rethink her coalition options; her present one has not been successful," said Klaus Schubert, politics professor at the University of Muenster.
Ironically, Merkel had an easier time in a "marriage of convenience" with the opposition Social Democrats (SPD) in her first term from 2005-2009 than what should have been her "marriage of love" with the FDP.
Schleswig-Holstein's voters are almost certain to eject the CDU-FDP alliance that has run Schleswig-Holstein since 2009. The question is whether the CDU can remain the largest party in the largely rural state of 2.8 million people on the Danish border and cling to power in a different coalition.
That would give the party vital second wind, in particular as a week later there will be a vote in Germany's most populous state North Rhine-Westphalia, where the CDU trails the SPD.
Opinion polls for Schleswig-Holstein show the CDU and opposition Social Democrats (SPD) neck-and-neck at 31 percent.
The most likely outcomes are a so-called "grand coalition" of the two largest parties, or a three-way coalition dubbed the "Danish traffic light" between the SPD, Greens and the South Schleswig Party (SSW), which represents the Danish minority.
A grand-coalition in Schleswig-Holstein or in NRW could point to another grand coalition at national level.
"Germans like the harmony of a grand coalition. The SPD is unlikely to become the largest party in Germany as a whole, which would leave no alternative but a grand coalition, and no alternative but for Merkel to lead it," said Schubert.
As in North Rhine-Westphalia, the themes of unemployment and high levels of state debt have dominated the campaigning.
Schleswig-Holstein's unemployment rate of 7.1 percent is one of the highest in western Germany but the question of how to reduce its 28 billion euros of debt has become paramount.
The latest national opinion polls put the CDU on 36 percent and the FDP struggling to reach the 5 percent threshold required for getting seats in the Bundestag (parliament).
The SPD and their Green allies slipped a few points to 25 and 12 percent respectively, losing ground to the unconventional Pirates, who stormed onto the political scene last year and have proved a big hit with first-time voters, polling 11 percent.
"The vote in Schleswig-Holstein will also be a crucial test of how the Pirates fare in a somewhat larger state and a non-urban environment," Schubert said.
The party won 8.9 percent of the vote in Berlin's regional election and 7.4 percent in Saarland, and look set to sail into the Bundestag in 2013.
The Pirates' surge has made it less likely that the SPD and Greens can form majority governments -- both at regional and national levels, an unexpected boon for Merkel.
Victory in Schleswig-Holstein, a lush lowland state with coasts on the North Sea on one side and the Baltic on the other, would be a huge morale boost for the SPD and CDU alike.
The CDU was in a dead heat with the SPD ahead of this year's first regional vote in tiny Saarland. It survived that scare to win comfortably, opting to form a government with the SPD after the FDP scored just 1.2 percent and was ejected from parliament.
Schleswig-Holstein, where fishing, shipbuilding and coastal tourism are pillars of the economy, is different. Polls show SPD leader Torsten Albig, charismatic mayor of the state capital Kiel, twice as popular as his CDU opponent Jost de Jager.
De Jager is characterized as somewhat awkward in the media and only became leader eight months ago after a scandal over his predecessor's relationship with a 16-year-old schoolgirl.
The Danish SSW, which is excused from meeting the 5 percent vote threshold because it represents a minority, could end up as kingmaker and help Albig form a government with the Greens.
Battling to bring the FDP back from the brink, Wolfgang Kubicki looks to have secured a much larger share of the vote for his party - at 7 percent - in Schleswig-Holstein than at national level.