By Alexandra Hudson
BERLIN (Reuters) - Angela Merkel's conservatives face a photo-finish state vote in Germany's north on Sunday, knowing that losing power in Schleswig-Holstein could give vital momentum to the opposition and dent the chancellor's 2013 re-election hopes.
Merkel's 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 prickly 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.
Schleswig-Holstein's voters are almost certain to eject the CDU-FDP alliance that has run Schleswig-Holstein since 2009.
The most likely outcomes are a three-way coalition dubbed the "Danish traffic light" between the opposition Social Democrats SPD, Greens and the South Schleswig Party (SSW), representing the Danish minority, or a "grand coalition" of the two largest parties - CDU and SPD.
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, at a sensitive time for the chancellor. She looks likely to lose her ally Nicolas Sarkozy in France's presidential vote on Sunday to Francois Hollande, who has pledged to try and temper the German-led austerity drive.
Merkel also faces a vote in Germany's most populous state North Rhine-Westphalia, frequently a barometer of future national voting trends, where the CDU trails the SPD by 7-8 percentage points.
Opinion polls for Schleswig-Holstein show the CDU and SPD neck-and-neck at 31 percent.
The CDU faces an uphill struggle. Polls show SPD candidate Torsten Albig, charismatic mayor of the state capital Kiel, twice as popular as his CDU opponent Jost de Jager.
De Jager only became leader eight months ago after a scandal over his predecessor's relationship with a 16-year-old girl.
"The mood is moving in our direction," de Jager said at a rally on Saturday.
"We won't make any statements about coalitions ahead of the poll, we are fighting for our own strength."
Battling to bring the FDP back from the brink is Wolfgang Kubicki, who looks to have secured a much larger share of the vote for his party - at 7 percent - than it can hope for at national level.
An eventual grand coalition in Schleswig-Holstein, where the themes of unemployment and high levels of state debt have dominated the campaigning, could point to another grand coalition at national level.
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.