BERLIN (Reuters) - Voting began in Germany's closely fought election on Sunday with millions of undecided voters holding the key to a result that will have major implications for economic reform in Europe.
Christian Democrat challenger Angela Merkel is expected to emerge as Germany's first woman chancellor, displacing Gerhard Schroeder who has led Germany for the past seven years at the head of a centre-left government of Social Democrats and Greens.
But with unprecedented numbers of voters apparently undecided on the eve of the vote, it was unclear whether she could muster enough support to form the centre-right coalition government she says is needed to push through deep reforms of Germany's ailing economy.
If she cannot, she will probably be forced to share power with Schroeder's Social Democrats (SPD) in a "grand coalition" that financial markets fear would produce gridlock and stall the reforms that Schroeder himself has already begun.
Polls opened at 8 a.m. (0600 GMT). Voting closes and the first exit polls are announced at 6 p.m. (1600 GMT) and a provisional result is expected to be announced in the early hours of Monday morning.
Weather forecasters are predicting fine autumn weather across most of the country.
The final opinion polls published on Friday gave Merkel's centre-right coalition with the liberal Free Democrats (FDP) a slim lead in a race it once dominated.
For Merkel, a quietly determined politician from the formerly communist east with none of Schroeder's electioneering charisma, victory would make her one of the most powerful leaders in Europe 15 years after she entered politics following the fall of the Berlin Wall.
Schroeder has thrown himself into campaigning with a drive that has rocked his opponents and raised the possibility that the SPD may be able to salvage something from the election even if Schroeder himself steps down.
That in itself would be a formidable achievement for a leader apparently facing oblivion when he announced in May that he would be seeking the election a year ahead of schedule.
For Germany and the rest of Europe, the stakes in the election are high.
Some five million Germans are out of work, the country's pensions system is in crisis, its public finances are overstretched and the economy that once drove growth in Europe is now acting as a drag on the rest of the continent.
Analysts say that if Germany succeeds in pushing through reforms, they could be a model for change in the rest of Europe.
Surveys show that most Germans believe the system needs changing but they are deeply uncertain about how far the changes should go and how the burden should be shared.
Schroeder's own "Agenda 2010" reforms to welfare and labour market rules have been the most ambitious attempt to overhaul the social security system in decades.
They have been attacked by the conservatives and by some commentators as not going far enough.
But they were bitterly resented by voters, contributing to a string of election defeats that raise questions about how much pain any party will be able or willing to impose.
They also helped foster the rise of a new leftist party of former communists and disaffected ex-Social Democrats that has shaken German politics and looks on course to form the third largest party in parliament.
Spearheaded by former SPD leader Oskar Lafontaine, a bitter rival of Schroeder's, the Left Party has been attacked by all the other main parties as a pointless vehicle for protest votes.
But it is the party's strong showing, fuelled by anger over the costs that reforms have imposed on the poor and unemployed, that has upset the balance of power and may deny Merkel the majority she seeks.