The FDP garnered around 14.6% of Sunday's vote, its best showing yet, paving the way for a coalition with the CDU, which led the polls with 33.6%, according to preliminary results.
The FDP is Germany's most free-market party and has long called for cutting red tape that holds back business activity. However, proposals such as deregulating the labor market are highly controversial in Germany, where even most center-right voters blame the global financial crisis on excessive market deregulation.
An FDP-run German foreign ministry would be a familiar sight for the U.S. and other German allies: The party supplied West Germany's foreign ministers from 1969 to 1998.
Mr. Westerwelle told cheering supporters at a rally in Berlin that he would push for "a fair tax system," with radically simpler tax laws as well as lower income-tax rates.
However, Mr. Westerwelle has also stressed the need for a strong social safety net, showing that he is sensitive to Germans' attachment to their social protections, which conflicts with the goal of scaling back the state.
Ms. Merkel's CDU supports more limited tax cuts and has called the FDP's tax proposals unrealistic.
Under the current arrangement in Germany, all nuclear power plants are to be phased out by 2021.
17 reactors with a combined generating capacity of 20.34 GWe (gigawatts). The total nuclear output in Germany in 2007 was 141 TWh. (5.5% of total world nuclear power, ten times more carbon free power than is generated from solar power and almost the level of all wind power in the world). The reactors are The law to phase out the reactors was set up in 2001 by the Social Democrats and their Green Party coalition partner at that time.
The dilemma for the German government is that even though the country now has a significant renewable capacity, this capacity provides nowhere near the same amount of electricity as existing nuclear plants. Neither is there any realistic hope that it can do so in the near future. If, therefore, nuclear power is abandoned and the existing plants are closed, then Germany would have no alternative but to turn to fossil fuel, probably lignite (coal).
One option would be to extend the life of these plants beyond the 2021 limit that was agreed in 2001. This would be the least-worst option for the nuclear opponents and there are signs from some SPD members that the party would consider this compromise in return for a firm commitment that nuclear power will finally be abandoned entirely and no new plants will be built.
The second option is the one favoured by the CDU, to reinstate the nuclear option as part of the energy mix and to build a new generation of nuclear plants to replace the existing fleet as it is retired. Once this route is chosen the lifetime of existing plants would almost certainly be extended too. Other than these two, there are no realistic alternatives except to stick to the agreed phase-out with no compromise.
An expert panel recommended to delay phase out by 8 years 7 reactors are scheduled for phase out over the next 4 years.
The German election is close as to whether a center right party will be formed with Merkel and the Christian Democrats (CDU) joining with the Free Democrats (FDP).
The polls indicate the CDU and FDP could take 47 per cent, enough to obtain a razor thin majority and form a governing coalition.
That would be more than the combined tally of the left of centre parties, the Social Democrats, the Green Party, and the left wing "Die Linke," who would reach about 46 per cent if polls are accurate.
It may take hours to become clear whether Merkel's CDU benefited from a quirk in German election rules that pollsters say could give them 20 extra "overhang" seats in parliament – gains that could tip the scales towards a centre-right majority.
20% were still undecided at the last polling.