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Sun Sep 22, 3:31 PM ET Projections by three television networks combining exit polls with early returns collected at key polling stations showed a slight but statistically insignificant lead for two Christian Democratic parties led by Stoiber, with about 39 percent, to about 38 percent for Schroeder's Social Democrats. The first official government returns were expected after 6 p.m. EDT.

The Greens party, in coalition with the Social Democrats for the last four years, was polling at about 9 percent — which could be decisive in helping Schroeder stay in power. Early returns showed the liberal Free Democrats, Stoiber's likely coalition partner, polling at 7 percent.

According to ZDF public television, the Social Democrats and Greens would win 300 seats to 297 for the Christian Democrats with their likely coalition partner, the liberal Free Democrats. Another public TV station, ARD, projected an even tighter race, with 299 seats for Schroeder's likely coalition and 298 for Stoiber's.

N-tv private television, using projections from the Forsa polling agency, gave 303 seats to a Social Democratic-Green coalition and 295 seats to the challengers.

Appearing confident, Schroeder told supporters at his party headquarters that the prospects appeared good to continue governing for another four years.

"This is suspenseful evening, a very suspenseful evening," Schroeder said. "A majority is a majority. If we have it, we will use it. We want to continue — and it looks like we will be able to."

Stoiber was equally jubilant.

"One thing is already clear: We have won the election," Stoiber told cheering supporters at his campaign headquarters. "The CDU, the great party of the center, is back. It is the biggest party in parliament. We will make what we can of this great result."

The Greens were elated by the strongest showing in their 22-year history. Greens leader Rezzo Schlauch said his party got momentum from the Iraq debate and the popularity of Foreign Minister Joschka Fischer. "We are so happy ... There was the issue of war and peace, and we have a highly competent foreign minister. It was a combination of the issues and the people in charge."

At the Social Democratic headquarters, party secretary general Franz Muentefering said his party would pursue a coalition with the Greens even under the narrowest of majorities.

"Coalitions are always difficult but we want to stay in power," Muentefering said.

The final days of the hotly contested race were overshadowed by tensions with the United States over Iraq, in particular by Justice Minister Herta Daeubler-Gmelin's reported

While Schroeder has resisted calls to force her resignation, a government official said he would not include the minister in his Cabinet if he wins re-election. The official spoke on condition of anonymity.

In a campaign already remarkable for straining relations with the United States because of Schroeder's emphatic opposition to American military action to oust Saddam Hussein ( news - web sites), Washington responded with anger to the remarks attributed to the justice minister.

Daeubler-Gmelin has denied drawing a direct comparison between Bush and Hitler. In a confused explanation, she initially said she had compared their methods, and later told reporters she had referred to diversionary tactics during a chaotic discussion, saying, "We know that from our history, since Adolf Nazi."

Despite attacks by Stoiber for undermining U.S.-German relations, Schroeder's anti-war stance resonated with Germans who overwhelmingly oppose a new Mideast conflict.

Schroeder's unusually harsh rhetoric — along with his handling of Germany's catastrophic floods and strong performance in a televised debate — helped him close the gap with the Bavarian governor, who led the polls for months by attacking Schroeder's economic record.

Voter turnout was running behind 1998, with official figures showing 42.8 percent of the more than 61 million voters casting ballots by 2 p.m., compared to 47 percent at the same hour four years ago.

Though the ruckus over the justice minister marred the final hours of his campaign, Schroeder appeared confident and smiled as he voted in his home city of Hanover. He declined to answer questions about the minister's fate, but admitted: "One is always a little nervous."

Stoiber has used the affair as ammunition, accusing the chancellor of whipping up emotions against the United States, Germany's staunchest ally, for electoral gain. Stoiber has pledged to repair the damage with Washington if elected.

On Iraq, Schroeder has insisted he would not commit troops for a war even if the United Nations ( news - web sites) backs military action. Like the chancellor, Stoiber opposes unilateral U.S. action, but he insists Germany must be ready to support any U.N.-backed action against Saddam — though not with front-line troops.

Stoiber also wants faster tax cuts than Schroeder, especially for small and midsize businesses. He pledged to overturn a Schroeder law that widened the powers of labor unions in workplace decisions and to curb rising energy taxes. And he intends to scrap an immigration law passed under Schroeder that he says is too liberal.

With two big and three smaller parties competing Sunday, the Free Democrats could resume the kingmaker's role they played in most postwar governments.

The major party best able to form a stable coalition — not necessarily the one with the most votes — will lead the next government and parliament which will be downsized from 669 to 598 seats.

Schroeder, 58, has governed with the Greens since unseating Helmut Kohl in 1998 and ending 16 years of conservative rule.

Stoiber, 60, has embraced the Free Democrats as he ran for national office after governing Bavaria for nine years. But the pro-business party FDP refused to rule out a coalition with either party in hopes of replacing the Greens as third-strongest force.

Early returns indicated the ex-communist Party of Democratic Socialism failed to achieve the 5 percent of the vote necessary to enter parliament. They still could make it into parliament if candidates win three seats directly.

Germans cast two votes Sunday, one for a local candidate and one for a party. The party vote is critical because it determines the percentage of seats each party wins in the Bundestag, or parliament.

To enter parliament, parties must either win 5 percent of the vote or at least three seats directly.