imageBERLIN: German Chancellor Angela Merkel's conservatives retained their grip on power in the eastern state of Saxony on Sunday but now face opposition from a fledgling anti-euro party, which won its first seats in a regional assembly.

Merkel's Christian Democrats (CDU) won more than 39 percent of the vote in the regional parliament, according to preliminary results, but the party needs a new coalition partner after its current allies crashed out.

Marking its debut into a state assembly, the Alternative for Germany (AfD) party, which backs the dissolution of the euro, exceeded pollsters predictions with around 10 percent, the initial results showed.

The CDU has ruled in Saxony since Germany's 1990 reunification. But its current coalition partners, the pro-business Free Democrats (FDP), failed to pass the five-percent threshold of votes to re-enter the state parliament.

Saxony CDU state premier Stanislaw Tillich described it as a “super result," despite it marking a drop for the party from five years ago, but said it was “bitter" to see a coalition partner flunk out of a regional parliament.

He ruled out teaming up with the AfD and said he wanted first to discuss a possible coalition with the Social Democrats (SPD), which would mirror Merkel's national “grand coalition", and then also with the ecologist Greens.

“We'll look for a partner with whom we can together achieve something for the state. And certainly the AfD isn't among them," Tillich said on ARD public television.

The outcome also marks the end of a chapter for the FDP, losing its last membership of a regional government after being kicked out of the national parliament last year.

The AfD, which leapt into the European Parliament in May but narrowly missed entering the German parliament in last September's general elections, was set up by economics professor Bernd Lucke, a former CDU member, early last year.

It also wants an end to EU bailouts and for Germany to return to its once beloved Deutschmark.

“It's time for a new party in Germany," Lucke said on ZDF television as the first results came in.

Merkel positioned herself as the single currency's champion during the eurozone debt crisis when Germany financed the lion's share of bailouts for stricken nations, demanding strict austerity measures in exchange.

AfD lead candidate Frauke Petry, 39, a trained chemist and mother of four, campaigned on family issues, calling for couples to have more children and for a tightening of abortion laws, as Germany's population is rapidly ageing.

“The AfD has arrived in Saxony but still more importantly, it has arrived in Germany," Petry said in Dresden late Sunday.

The party has also called for a referendum on the building of mosques with minarets in Saxony.

The Sueddeutsche Zeitung daily was critical, saying the AfD promised people a “Deutschmark feeling" in euro times.

“Whoever wants to know how it formerly was goes to the museum. Whoever wants to vote for what went previously votes the AfD," it commented.

Closest behind the CDU was the far-left Linke party, which has roots in East German communism, with more than 18 percent, followed by the SPD which won around 12 percent, the preliminary results showed.

The Greens won more than five percent, while the fate of the far-right, anti-immigrant National Democratic Party of Germany in the Saxony assembly was uncertain, hovering around the 5 percent threshold.

The vote in Saxony was the first regional legislative election since Merkel's triumphant return for a third stint at the helm of the eurozone's top economy last year.

Saxony, which borders Poland and the Czech Republic, is one of the most dynamic of Germany's ex-communist states, hosting big car producers and earning the nickname “Silicon Saxony".

As Germany approaches the 25th anniversary of the fall of the Berlin Wall, the Saxony ballot is the first of three former eastern states to vote in quick succession, followed by neighbouring Thuringia and Brandenburg on September 14.