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State poll a setback for Schroeder

From CNN Correspondent Chris Burns

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BERLIN, Germany (CNN) -- Struggling with double-digit unemployment, German Chancellor Gerhard Schroeder's party has lost a northern state election to the conservative opposition but could stay in power there with the support of smaller parties, television projections showed.

Leaders from both major parties claimed victory after the initial projections showed Schroeder's Social Democrats (SPD) with 38.5 percent of the vote in Schleswig-Holstein, where the SPD has held power for 17 years.

The opposition Christian Democratic Union (CDU) took about 40 percent of the vote, while the SPD-allied Greens and the CDU's allies in the Free Democrats each took about 7 percent of the vote.

The potential kingmaker in a new coalition was the Danish-speaking SSW, which took 3.5 percent and traditionally aligns itself with the Social Democrats. But this year, analysts said the SSW's support could go either way.

Projections gave the conservatives a bare one-seat majority in the 69-seat state parliament without the SSW.

The SPD had been counting on a victory in Schleswig-Holstein, a small northern state of 2.8 million bordering Denmark, after a string of state election losses last year.

National elections are set for next year.

The far-right National Democratic Party, or NPD, took 2 percent of the vote, projections showed -- double its share in 2000, but still short of the 5 percent needed to enter the state parliament.

The party took more than 9 percent in the depressed eastern state of Saxony last year.

The SSW has special status and is exempted from the 5 percent threshhold.

Schroeder has been beset by rising unemployment. In addition, the Hartz IV welfare reform program that kicked in on January 1 effectively has cut benefits to many Germans.

Meanwhile, Foreign Minister Joschka Fischer -- head of the national Greens and the most popular politician in Germany in recent years -- has come under fire for a tourist visa scandal embroiling his ministry.

Fischer has taken political responsibility for it, but the conservatives have been attacking him in a parliamentary investigation.

What may have saved the SPD in Sunday's state election was its charismatic and popular Schleswig-Holstein premier, Heide Simonis, Germany's only female state chief.

Her conservative challenger, Harry-Peter Carstensen, is considered gaffe-prone.

The next state elections are scheduled for May 22 in North Rhine Westphalia, Germany's most populous state.

The region is another SPD stronghold, and observers say the vote will be a key test for Schroeder ahead of next year's national elections.

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