Restless voters may soften Merkel

German voters head to the polls this weekend in an election that has prompted little enthusiasm at home but is being eagerly watched overseas for pointers on the future of the European Union's largest nation and biggest economy.

Key EU issues - among them, decisions on banking union, youth unemployment and measures to end an economic crisis now in its fourth year - have been placed on hold, awaiting the outcome.

Barring a huge upset, conservative incumbent Angela Merkel is poised to emerge as leader of the party with the largest share of seats in the Bundestag, the Lower House of Parliament.

But in the countdown to polling day, the electoral terrain seems to have shifted, muddying predictions as to what coalition Merkel can assemble for a third four-year term as Chancellor.

And if she is able to stay in office, the constraints of coalition government could reshape parts of her programme, crimping in particular her tough austerity message to Europe, say analysts.

Merkel's Christian Democratic Union (CDU)/Christian Social Union (CSU) alliance is forecast to reap nearly 40 per cent of the vote, while the main opposition centre-left Social Democratic Party (SPD) is on course for just under 30 per cent.

Merkel's coalition partner of the past four years, the pro-business Free Democratic Party (FDP), performed disastrously last week in a regional poll in the state of Bavaria. If this result is repeated across the nation tomorrow, the party will fail to muster the minimum 5 per cent of the vote need to enter the Bundestag. Even if the FDP does haul itself over the threshold, Merkel would still probably have to woo other partners to forge a majority.

The Green Party has ruled out any coalition with the CDU - but with polls showing them garnering just 15 per cent of the vote it would not be enough to tip the scales of an SPD/Green pact over the 50 per cent mark.

That would leave the two main dancers in the coalition ballet looking for partners among either a leftwing party, Linke, or a new anti-Europe party, Alternative fuer Deutschland, which draws much of its support from alienated members of the CDU.

If these parties fail to gain seats or are snubbed for government, Merkel would have to look at working with the SPD in a "grand coalition".

"A grand coalition could be useful for Merkel," said Almut Moeller of the German Council on Foreign Relations in Berlin. "If she has to go down that path to remain in power, she might not be unhappy. It would be more inclusive to the German domestic audience."

Postwar Germany has known two such political hybrids, the last of which took office in 2005 with Merkel at its head, in her first term as Chancellor.

Back then the German economy was emerging from a period of harsh restructuring. Sensing the mood for unity, the two parties took a pragmatic approach, forging a joint programme under the slogan, "Together for Germany: with courage and humanity."

Today, though, the German economy is in high gear. There is no sense of economic urgency, so there is less glue to hold the two opposites together, and tensions could be sharp.

A CDU-SPD government would inevitably face differences on social spending and labour legislation, but would also see potential for common ground on investing in infrastructure and education, say political observers.

On foreign policy, no one expects any change to Germany's opposition to military intervention whoever becomes the next Chancellor.

But differences between the two parties may affect strategy on Europe, where the German public is conflicted and an important decision by the country's top court is awaited.

According to two separate polls, 70 per cent of voters oppose more eurozone bailouts, to which Germany has committed tens of billions of euros, yet 60 per cent of them view the EU positively. The German Constitutional Court, meanwhile, is shortly to rule whether the European Central Bank has acted legally in its bailout mechanism.

Election campaign debate on the euro crisis, though, has been low-key, for it touches so much on the thorny question of national sovereignty and the risks for German taxpayers.

Merkel has said she wants European neighbours to cut and restructure their national budgets to allow for long-term fiscal stability.

Her SPD challenger, Peer Steinbrueck, has called for greater flexibility of austerity measures and been broadly supportive of euro bonds, meaning the pooling of debt. Both have been tight-lipped on "integration"- whether countries should revive the goal of transferring more authority to Brussels.

But if Alternative fuer Deutschland stun the pollsters and are able to force their way into government, Europe can expect a far tougher line on eurozone bailouts, and further integration will be dispatched into limbo.

The presence of the SPD in government would have an impact on Germany's key partnership with France.

Traditionally Europe's political and economic "locomotive," the Franco-German alliance has been stalled since Francois Hollande, a Socialist, succeeded Nicolas Sarkozy, a conservative, as France's President in May 2012.

He and Merkel are fiercely at odds over economic strategy.

"Without a better consent on substance between Berlin and Paris, the eurozone cannot be ultimately rescued," said Moeller. "So there is a lot at stake for Berlin."