By Andi Kranz and Leon Malherbe

AACHEN/POTSDAM (Reuters) -Germans went to the polls on Sunday in a national election too close to call, with the centre-left Social Democrats (SPD) mounting a strong challenge to retiring Chancellor Angela Merkel’s conservatives.

Merkel has been in power since 2005 but plans to step down after the election, making the vote an era-changing event https://reut.rs/3hfDamG to set the future course of Europe’s largest economy.

A fractured electorate means that after the election, leading parties will sound each other out before embarking on more formal coalition negotiations https://reut.rs/2ZeqYw3 that could take months, leaving Merkel, 67, in charge in a caretaker role.

“We all sense that this is a very important federal election,” Laschet told journalists after voting in his home constituency of Aachen. “It is a federal election that will decide the direction of Germany in coming years and therefore every vote counts.”

Running against Laschet is Olaf Scholz https://www.reuters.com/world/europe/german-leadership-race-boring-olaf-bets-craving-stability-2021-09-21 of the SPD, the finance minister in Merkel’s right-left coalition who won all three televised debates between the leading candidates.

Scholz, 63, has seen his party’s lead over the conservatives squeezed to 1-3 points in final opinion polls https://tmsnrt.rs/3BiQwWF, leaving Laschet with a chance of clinching a narrow victory.

“I hope that as many citizens as possible will go and vote and make a very strong result for the SPD possible and give me the mandate to become the next chancellor of the Federal Republic of Germany,” Scholz said after casting a ballot in his own constituency of Potsdam near Berlin.

The election is expected to yield a splintered parliament, which will force the winner to form a three-way coalition to secure a majority.

The most likely coalition scenarios see either the SPD or the conservative CDU/CSU bloc – whoever comes first – forming an alliance with the Greens https://www.reuters.com/article/uk-germany-election-candidates-baerbock-idUKKBN2GH188 and the liberal Free Democrats (FDP).

Scholz told supporters in Potsdam on Saturday that his preferred outcome was for the SPD and Greens to secure a majority to rule alone without a third partner.

Both the conservatives and the FDP reject a European “debt union” https://reut.rs/2T1UKS3 and want to ensure that joint European Union borrowing to finance the bloc’s coronavirus recovery package remains a one-off. The SPD has talked about taking steps towards a fiscal union.

The Greens favour a common European fiscal policy to support investment in the environment, research, infrastructure and education.

Scholz has not ruled out a leftist coalition with the Greens and the Left party, which wants to pull Germany out of NATO, a red line for the SPD.