By James Mackenzie
BERLIN, March 8 (Reuters) - Germany's environmental Greens took a narrow lead over Chancellor Friedrich Merz's conservatives in a state election in the southwestern region of Baden-Wuerttemberg on Sunday, early projections showed, leaving the two parties poised to continue their long-running coalition.
The far-right Alternative for Germany (AfD) party, which has made strong gains in recent years, was in third place, confirming its position as Germany's main opposition party, even outside its heartland in the former communist eastern states.
Initially trailing in the race, the Greens caught up with Merz's Christian Democrats (CDU) as the ballot approached, helped by the popularity of their lead candidate Cem Ozdemir, a moderate former agriculture minister with a more established profile than his 37-year-old CDU rival Manuel Hagel.
Early projections on public broadcaster ARD showed the Greens in first place with 30.4% of the vote, followed by the CDU on 29.7% and the AfD on 18.6%. The Social Democrats were on course for 5.6%, just scraping past the minimum threshold to enter state parliament.
The Greens and CDU have been in a coalition in Baden-Wuerttemberg for the past decade and if confirmed, the result would represent a continuation of the status quo.
But the conservatives had been hoping to name the state premier as strongest party and the result is likely to fuel internal discontent at the sluggish pace of reforms promised by Merz's government in Berlin.
Baden-Wuerttemberg, home to Mercedes-Benz, Porsche, Bosch, is one of Germany's most prosperous regions, but its core auto sector has been hit hard by increasing competition from China's electric vehicle makers.
Jens Spahn, the head of the CDU parliamentary group in the federal parliament, said the result underlined the Merz government's struggle to cut through to voters worried about an economy only slowly emerging from two years in recession.
"The decisions we make here are not yet sufficiently noticeable in everyday life," he said on ARD television. "We must ensure growth; that will be the decisive factor."
For Merz's coalition partners, the centre-left Social Democrats, the result looked set to be their worst-ever in a state election, confirming the precipitous drop in support seen in recent years.
The Baden-Wuerttemberg election was the first of five state elections this year, with voters in neighbouring Rhineland-Palatinate due to go to the polls on March 22, followed by Berlin, Saxony-Anhalt and Mecklenburg-Vorpommern in September.
(Reporting by James Mackenzie; Editing by Christoph Steitz and Ros Russell)
