Berlin, Sep 27 (DPA) German Chancellor Angela Merkel was set for another four years in power after her Christian Democrats (CDU) won enough votes to form a centre-right coalition with the smaller Free Democrats (FDP), early returns from Sunday's general election showed.

Projections by Germany's two biggest television networks showed the CDU and FDP polling just over 48 percent, enough to give them a majority of seats in parliament under the country's complex electoral system.

This would enable Merkel to end the power-sharing deal she worked out with the left-leaning Social Democrats (SPD) of Frank-Walter Steinmeier after the last election in 2005.

The SPD slumped to 22.7-23.3 percent, a drop of more than 10 percentage points from the vote four years ago, and its worst ever showing in a general election.

Steinmeier, who was seeking to unseat Merkel as chancellor, conceded defeat less than an hour after polls closed at 6 pm.

"This is a bitter day for Social Democracy in Germany," he told SPD supporters in Berlin. "This is a bitter defeat."

"We lost the election," Peter Struck, a former chief of the Social Democratic parliamentary group, conceded in an ARD television interview.

Volker Kauder, head of the CDU parliamentary group, said: "We have achieved our electoral objective ... "She (Merkel) has won the election, she can remain chancellor."

In total, 62.2 million Germans were entitled to vote for 28 parties seeking to enter the lower house of parliament, or Bundestag. Only five - CDU, SPD, FDP, Greens and the Left Party - cleared the 5-percent hurdle to fill the more than 600 seats.

The CDU polled 33.5 percent, the FDP 14.8 percent, the Greens around 10 percent and the Left Party slightly more than 12 percent, according to the projects by ARD and ZDF television networks.

Voter turnout plunged to 72 percent, according to official estimates, well below the record low of 77.7 percent in 2005.

Merkel, who wanted to ditch the SPD in favour of the free-market FDP, cast her ballot at a polling booth set up in the canteen of Berlin's Humboldt University, not far from her apartment.

FDP chairman Guido Westerwelle oozed confidence when he voted in his home constituency of Bonn, the former capital of West Germany.

"It'll all go well," said Westerwelle, whose party is hoping for a return to government after 11 years in opposition. "I'm quite optimistic," he told the German Press Agency DPA.

Under a quirk in the German electoral system, the votes projected for the CDU and FDP will enable them to form a coalition even if they fail to gain a majority of more than 50 percent.

Germans have two votes - one for candidates who represent their electoral district in parliament and the other for party lists.

Parties can win additional, or "overhang" seats in parliament, if they get more candidates elected directly than they are entitled to under their proportional allocation of votes from the party lists.

In two federal states, voters are also electing their regional governments. This also affects the make-up of the upper house of parliament, or Bundesrat.

A close race between the CDU and SPD is expected in both the northernmost state of Schleswig-Holstein and the eastern state of Brandenburg, which surrounds Berlin.

Security services were on high alert after a series of militant-Islamist videos threatened terror attacks if Germany did not withdraw its troops from the NATO-led mission in Afghanistan.

Merkel has centered her election pledges on the economic crisis, arguing that the need to stimulate economic growth would be best met by a coalition with the free-market FDP.

The SPD had drawn up an ambitious plan to create 4 million new jobs, half of which are to come through so-called green technology.

In the last election, in 2005, the CDU won 35 percent of the vote while the FDP scraped 10 percent, falling short of opinion poll predictions of a CDU-FDP majority.

At the time, the SPD won 34 percent, the Left achieved almost 9 percent, and the Greens trailed at 8 percent of the vote.