German Chancellor Angela Merkel secured victory on Sunday at the head of a new centre-right coalition she said was needed "to move our country forwards."
"We've achieved our goal of forming a new government," she said after her Christian Democrats (CDU) and their preferred allies won a safe parliamentary majority in federal elections, television projections of partial vote counts showed.
After a low-key campaign focused on a promise of moderate tax cuts, Merkel's CDU and its Bavarian sister party, the Christian Social Union (CSU), saw their vote share ease slightly.
But the CDU/CSU benefited from the success of the pro-business Free Democratic Party (FDP), which won a place as junior partner in Merkel's new government, replacing her Social Democratic Party (SPD) partner of the past four years.
"We wanted a stable government that shows greater determination to move our country forwards," a beaming Merkel told supporters, amid cries of "Angie, Angie."
The CDU/CSU saw their joint vote share decline by 1.3 per cent from 2005 to 33.9 per cent, a computerized projection on the ARD television network said half-way through the vote counting.
The FDP leader, Guido Westerwelle, emerges from opposition to become a key figure in the new German government over the next four years.
He and Merkel had agreed before the election to ally if they could, and he is widely expected to be offered the post of foreign minister.
The FDP won 14.5 per cent of the vote nationally, increasing its share by 4.7 percentage points compared to 2005.
An elated Westerwelle signalled he would bargain hard in the new coalition, telling supporters, "We want to co-govern."
He said the FDP would demand a "fair" tax system, better education and respect for civil liberties.
Merkel's previous coalition ally, the SPD, crashed to its worst result in the six-decade history of modern Germany with just 23.1 percent of the votes, down 11.2 points.
Analysts for ZDF television predicted the Christian parties and FDP would occupy 323 seats, a safe majority out of the 614 seats likely to be filled in the new lower chamber of parliament, the Bundestag.
In a speech to SPD activists in Berlin, the centre-left party's lead candidate, Frank-Walter Steinmeier, conceded defeat, saying Merkel's supporters and the FDP had won a working majority.
Steinmeier, who was foreign minister in the outgoing government, said, "This is a bitter day for German social democracy, a bitter defeat after fighting a campaign with so much commitment."
Final vote counts were expected after midnight, but were not expected to differ much from the network predictions, based on partial counts.