BERLIN • Germany's Social Democrats (SPD) beat Chancellor Angela Merkel's conservatives in a vote in the northern state of Lower Saxony yesterday, in a setback for Dr Merkel as she prepares for tricky three-way coalition talks at the national level this week.

The SPD, which has governed the swing state - home to carmaker Volkswagen - with the Greens for four years, won 37.5 per cent, well up from 32.6 per cent in the last election there in 2013, according to an exit poll from Infratest dimap.

Dr Merkel's Christian Democrats fetched 35 per cent of the vote in the rich agricultural state, down from 36 per cent in the 2013 election there.

The environmentalist Greens, currently the junior coalition partner to the SPD in Lower Saxony, won 8.5 per cent.

The liberal Free Democrats (FDP) won 7 per cent and the far-right Alternative for Germany cleared the 5 per cent threshold to enter Parliament with 5.5 per cent.

Dr Merkel's conservatives, which scored their worst result since 1949 in last month's national election, begin exploratory discussions with the FDP and Greens in Berlin this week as they seek to cobble together a federal government.

Dr Simon Fink, a political scientist at the University of Goettingen, said that no one had dared to start coalition negotiations in Berlin ahead of yesterday's election in Lower Saxony, which is slightly bigger than the Netherlands.

"Everyone was scared that if they did something at the national level or committed themselves to something, then their colleagues in Lower Saxony could end up suffering," said Dr Fink.

Dr Merkel's reversal last month, along with the SPD's insistence on going into opposition, left her with no viable option other than a "Jamaica" coalition, so named because the three parties' colours correspond with the black, yellow and green of Jamaica's flag.

It means that the prospective partners will need to overcome yawning differences on issues including immigration, European Union reform, tax and environmental protection.

After 12 years at the helm of the European Union's top economy, Dr Merkel is now facing one of her toughest challenges: To turn rival political players into roommates.

If she succeeds, Germany could get its first coalition government grouping the three parties.

But if they fail to reach an agreement, Dr Merkel will have to call fresh elections.

The SPD-Green coalition lost its majority in Lower Saxony when a Greens lawmaker defected to the Christian Democrats, triggering a snap election.

REUTERS, AGENCE FRANCE-PRESSE