(Reuters) - German Chancellor Angela Merkel's conservatives appeared on track to retain power in an election in the northern city-state of Hamburg on Sunday which also delivered gains for a new far-left party. Christian Democrat (CDU) Premier Ole von Beust, a Merkel ally who has ruled the port city since 2001, looked set to keep his job after winning 43 percent of the vote, down from 47 percent four years ago, an exit poll from ZDF television showed. However, he looks likely to lose his absolute majority in parliament and will probably be forced to forge a coalition, most likely with the Greens or the centre-left Social Democrats (SPD), who scored 34 percent in the exit poll. Merkel, who has presided over a robust economy, remains popular over two years after narrowly beating her predecessor Gerhard Schroeder and taking power atop an awkward "grand coalition" with his SPD. Her Christian Democrats (CDU) have seen their support drop in three straight regional elections this year, clouding their prospects in the run-up to the next federal vote in 2009. But their longtime rivals, the SPD, look much weaker -- a situation which could heighten tensions in Merkel's ruling coalition as the national election nears. The SPD's woes are partly due to the Left party, a grouping of ex-communists and disgruntled former SPD members, who until last month had only made a mark in states located in the former East Germany. The Left, which may have received a boost in Hamburg from a nationwide tax-evasion scandal that has fuelled a backlash against big business, scored 6.5 percent to enter its fourth state parliament in the western part of the country. As in an election last month in the western state of Hesse where the Left also scored well, neither the CDU nor the SPD, Germany's biggest parties, won enough support in Hamburg to take power with their preferred coalition partners. The finely balanced result may therefore spawn untested political alliances, for example between the CDU and environmentalist Greens, which if successful could be replicated at the federal level next year. The SPD has ruled out forming a coalition in Hamburg with the Left, which is run by Oskar Lafontaine, a fiery ex-SPD chairman and finance minister under Schroeder who is now despised by much of his old party. But over the past week the SPD leadership has been flirting with the idea of using Left party votes to help it seize power in Hesse after a deadlocked vote there in January. This may have alienated their moderate base in Hamburg, a city of contrasts which is home to some of Germany's wealthiest people but also a sizeable immigrant community and blue-collar workforce thanks to its huge port and large Airbus factory.