By Caroline Copley and Michelle Martin
BERLIN (Reuters) - The anti-euro Alternative for Germany (AfD) party looked set to win its first seats in a regional assembly in the west of the country on Sunday after an election in Hamburg which also saw Angela Merkel's conservatives suffer their worst result since World War Two.
Exit polls showed the AfD just above the 5 percent threshold needed to enter the state parliament. If confirmed, the result could help establish the anti-bailout party as a force beyond the former communist east, where it posted big gains in three regional votes last year.
The Social Democrats (SPD) handily won the vote in Hamburg, a northern port city that has traditionally been a stronghold for the center-left party, winning around 47 percent of the vote. To stay in office, popular SPD state premier Olaf Scholz will probably have to form a coalition with the environmentalist Greens.
Chancellor Merkel's Christian Democrats (CDU) were the big losers on the night, coming in a distant second at about 16 percent.
Still, Merkel remains hugely popular in Germany and experts had cautioned ahead of the vote that the result should not be seen as a reflection of the national mood.
The conservatives put up a candidate widely viewed as a weak alternative to Scholz, a centrist whose steady leadership has been likened to that of Merkel.
Paul Ziemiak, who leads the youth wing of Merkel's CDU, called the result a "serious wake-up call" for his party, but Michael Grosse-Broemer, parliamentary whip for the CDU in Berlin, played it down, saying it was "an election in a big city - nothing more and nothing less".
Worries that Greece's new anti-austerity government could unleash a fresh wave of turmoil in the euro zone may have given the AfD a boost in Hamburg.
The result will help silence those who predicted the AfD would fizzle out or that its appeal was limited to eastern Germany, where its law-and-order, anti-immigration stances are popular. Founded in 2013, the AfD is one of a number of new parties across Europe that have lured voters worried about the economic costs of euro membership.
Another interesting development in Hamburg was a strong score for the business-friendly Free Democrats (FDP), an influential kingmaker in post-war German politics which shockingly failed to win enough votes to make it into the federal parliament in 2013.
The FDP was on track to win some 7 percent of the vote in Hamburg, breaking a string of embarrassing losses and signaling that the party's prospects may be brightening.