German states vote as reform pressure builds

BERLIN, Mar 26 (Reuters) Voting began today in three German regional elections that are expected to shore up support for Chancellor Angela Merkel's ruling coalition but also herald new pressure for reforms once they are over.

The elections, in the wealthy states of Baden-Wuerttemberg and Rhineland-Palatinate and the poorer eastern region of Saxony-Anhalt, are the first since Merkel took office in November as head of a delicately balanced government of conservatives (CDU/CSU) and Social Democrats (SPD).

The CDU premiers of Baden-Wuerttemberg and Saxony-Anhalt, Guenther Oettinger and Wolfgang Boehmer, and the SPD premier of Rhineland-Palatinate, Kurt Beck, all look set to be re-elected, a result that would lend stability to the coalition in Berlin.

But analysts agree the state polls will signal the end of Merkel's grace period, in which she has made her mark on the foreign policy front but steered clear of divisive and painful reforms of healthcare, taxes and the labour market.

''From tomorrow onwards, Merkel will have no reason to delay the domestic reform debate any further,'' said Bank of America economist Holger Schmieding.

''The way in which she steers the reform debate in the next few months will be crucial for the success -- or failure -- of her chancellorship.'' TURNOUT DOWN Polls opened at 1130 hrs and are scheduled to close at 2130 hrs, when first exit polls will be published, to be followed by projections shortly afterwards.

Figures published at 1330 hrs suggested turnout had been lower than in the previous elections in all three states.

In Saxony-Anhalt, 20.1 percent of those eligible to vote had cast their ballots, compared to 30.8 percent who had done so at the same point in 2002.

In Baden-Wuerttemberg, some 12.6 per cent had voted, down 4.5 percentage points.

And in Rhineland-Palatinate, 35 per cent had voted, down three points, although a spokesman said the figures were not representative for the whole state.

Merkel was forced to tone down more radical reform proposals after failing to win enough votes in September's general election to be able to rule with her preferred partners, the liberal Free Democrats (FDP).

Her hands have been partly tied since then by the need to co-exist with the SPD, the conservatives' traditional rivals.

If all goes according to plan in the state polls, Germany's first female chancellor is expected to launch a reform of the creaking health insurance system, albeit one that will not go as far as she would like.

The result is likely to be a compromise between SPD proposals for an income-related ''citizen's insurance'' and CDU plans for a flat premium, charged irrespective of income.

Many analysts have already expressed fears the outcome will be a mess. But progress on health reform is being seen as a key indicator of whether Merkel's government is capable of takling problems that all sides acknowledge must be solved.

REUTERS DKS PC2026