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Angela Merkel has been re-elected for a fourth term as Germany chancellor while nationalists have made a historic breakthrough in federal elections, exit polls suggest.

According to local reports, support for her conservative CDU/CSU alliance has dwindled, but the bloc will remain the largest in the parliament.

CDU/CSU’s current coalition partner, the social democratic SPD, says it will go into opposition following big losses.

The nationalist AfD is on track to become the third party.

The AfD’s performance, better than forecast in opinion polls, means the right-wing, anti-Islam party will have seats in the Bundestag for the first time.

Dozens of protesters have gathered outside the AfD’s headquarters in Berlin, some with placards saying “Refugees are welcome”.

While Angela Merkel’s alliance has remained the largest party, the numbers, if confirmed, are the worst result for the alliance between the Christian Democrat (CDU) and the Christian Social Union (CSU) under the chancellor’s leadership.

Addressing supporters, Angela Merkel, who has been in the job for 12 years, said she had hoped for a “better result”.

She added that she would listen to the “concerns, worries and anxieties” of voters of the Alternative for Germany (AfD) in order to win them back.

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Angela Merkel also said her government would have to deal with economic and security issues as well as addressing the root causes of migration – one of the main reasons behind the AfD’s result.

The chancellor is being punished for opening Germany’s door to almost 900,000 undocumented refugees and migrants.

The exit polls suggest the Social Democrats (SPD), led by Martin Schulz, have fallen to a new post-World War Two low. He said the result meant the end of the “grand coalition” with Angela Merkel’s alliance.

“It’s a difficult and bitter day for social democrats in Germany,” Martin Schulz told supporters.

“We haven’t reached our objective.”

With the possibility of an alliance with the SPD rejected, Angela Merkel’s options are narrow, and the process of forming a new coalition could take months.

The projections suggest that six parties will be in the German parliament for the first time since World War Two.

The most likely scenario is of a “Jamaica” coalition, so-called because of the colors of Jamaica’s flag. It includes the black CDU/CSU, the yellow, business-friendly Free Democrats (FDP) – who are returning to parliament after a four-year hiatus – and the Greens.

It is not a marriage made in heaven, as the Greens want to phase out 20 coal-fired power plants and the FDP disagree, but it is the only formation that would guarantee enough seats in the new Bundestag, German broadcaster ZDF says.

All parties have rejected working with the AfD.

The AfD has capitalized on a backlash against Angela Merkel’s policy towards migrants and refugees, many of them from war-torn, mainly Muslim countries like Syria.

The party’s program is heavily anti-immigrant, and particularly anti-Islam. It called for a ban on minarets and considered Islam incompatible with German culture.

Additionally, several of the AfD’s candidates have been linked to far-right remarks.

Prominent AfD figure Frauke Petry said on Twitter that Germany had experienced an incomparable “political earthquake”.

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Polls have opened in Germany with Chancellor Angela Merkel vying for a third term in charge of Europe’s most powerful economy.

Angela Merkel’s Christian Democrats may take the largest number of seats in parliament, or Bundestag, according to latest polls.

But Angela Merkel’s coalition partners, the Free Democrats, may not gain the 5% vote share required to win any seats.

If so, Angela Merkel may have to consider a coalition with her main rival Peer Steinbrueck’s Social Democrats.

A coalition of Centre-Left, Left and Green parties is also a possibility.

Voting opened at 08:00 local time and is due to close at 16:00.

Elections in Germany are often followed by a period of several weeks of coalition talks before the final shape of the government emerges.

On Saturday, the main parties concluded their campaigns with large rallies.

Polls have opened in Germany with Chancellor Angela Merkel vying for a third term in charge of Europe's most powerful economy

Polls have opened in Germany with Chancellor Angela Merkel vying for a third term in charge of Europe’s most powerful economy

In Berlin, Angela Merkel asked for votes to continue with her government’s policies into 2017.

“I ask the people in Germany to give me a strong mandate so that I can continue to serve Germany for another four years, for a stronger Germany, a country which is well respected in Europe, which defends its interests but is also a friend of a lot of countries.”

In Frankfurt, Peer Steinbrueck – who leads the opposition SDP, told his supporters to believe in the possibility of victory.

“The voters decide, not commentary beforehand,” he said.

“It’s not a game. Don’t believe it’s decided yet – it isn’t. I would ask for the voters’ decision to be respected, because it’s them, not political polls or certain observers, who decide an election.”

The Green Party – who may play some part in an eventual governing coalition – has criticized Angela Merkel’s government for raising taxes.

The Free Democrats (FDP), whose best-known member is Foreign Minister Guido Westerwelle, has seen its fortunes decline sharply since the last election in 2009, when it won nearly 15% of the vote.

Analysts say the party, traditionally more liberal than the CDU/CSU, has struggled to stand out from its more powerful coalition partner on economic policy.

If the FDP do badly, as expected, the CDU/CSU may find themselves looking to other small parties to form a broader, more fragile coalition.

The election is one of the most important in years because of Germany’s dominant role in the eurozone.

With the biggest population of any EU state, Germany enjoys a GDP that far outstrips the economies of its partners and is crucial to decisions on tackling the eurozone’s debt crisis.

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