By Sarah Marsh
BERLIN (Reuters) - Germans were voting in two eastern states on Sunday, with the far-right AfD on track to win a state election for the first time and Chancellor Olaf Scholz's coalition set to receive a drubbing just a year before federal elections.
The Alternative for Germany (AfD) is polling first on 30% in Thuringia and is neck-and-neck with the conservatives in Saxony on 30-32%. A win would mark the first time a far-right party has the most seats in a German state parliament since World War Two.
The 11-year-old party would be unlikely to be able to form a state government even if it does win, as it is polling short of a majority and other parties refuse to collaborate with it.
But a strong showing for the AfD and another populist party, the newly-created Sahra Wagenknecht Alliance (BSW), named after its founder, a former communist, would complicate coalition building.
"I just hope that we get a coalition that is democratic and not right-wing at the end," said Naila Kiesel after casting her ballot in the city of Jena in Thuringia.
Polls close at 6 p.m. (1600 GMT), when the first exit surveys will be published.
Both the AfD and BSW are anti-migration, eurosceptic, Russia-friendly and are particularly strong in the former Communist-run East, where concerns about a cost of living crisis, the Ukraine war and immigration run deep.
A deadly stabbing spree linked to Islamic State 10 days ago in the western German city of Solingen stoked concerns about immigration in particular and criticism of the government's handling of the issue.
"Our freedoms are being increasingly restricted because people are being allowed into the country who don't fit in," the AfD's leader in Thuringia, Bjoern Hoecke, told a campaign event in Nordhausen on Thursday.
The former history teacher is a polarizing figure who has called Berlin's memorial to Nazi Germany's Holocaust of Europe's Jews a "monument of shame" and was convicted earlier this year for using a Nazi slogan at a party rally.
'POLITICAL EARTHQUAKE'
All three parties in Scholz's federal coalition are seen losing votes on Sunday, with the Greens and liberal Free Democrats likely to struggle to reach the 5% threshold to enter parliament.
Discontent with the federal government stems partly from the fact it is an ideologically heterogeneous coalition plagued by infighting. A rout in the East will only exacerbate those tensions, analysts say.
"The state elections... have the potential to trigger an earthquake in Berlin," Wagenknecht told a campaign rally in Erfurt, the capital of Thuringia, on Thursday.
Political analysts say Scholz's coalition is unlikely to disband before the next federal election in September 2025 as none of the partners currently expect a good result.
The BSW, which defines itself as socially conservative and economically leftwing, has seen a stellar rise since its creation in January, posing a particular threat to Scholz's centre-left Social Democrats.
The party is expected to win up to 12-20% on Sunday, which could put it in kingmaker position in both states. Its foreign policy views would make it an unlikely partner for any of the mainstream parties at national level.
The AfD and BSW together are expected to take some 40-50% of the vote in the two states compared with 23-27.5% at a national level, laying bare the continuing divide between East and West more than 30 years after reunification.
Party allegiance is lower in the East while affinity with Russia and scepticism about Germany's democratic structures are greater.
Narrowing economic differences with the West and a recent string of high profile multi-billion euro investments in sectors such as the chipmaking and electric car industries have failed to cheer locals.