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* Lower Saxony vote on Sunday kicks off German election year
* Merkel's CDU bounce back strongly in fourth-largest state
* Cliff-hanger vote between centre-right and centre-left
By Erik Kirschbaum
HANOVER, Jan 20 (Reuters) - German Chancellor Angela Merkel's Christian Democrats are hoping for victory in a state contest on Sunday that could end a long losing streak and set the tone for September's federal election.
Citizens in the northern state of Lower Saxony will begin voting at 8 a.m. on Sunday (0700 GMT) in what has been a riveting battle between Merkel's centre-right coalition and the centre-left Social Democrat-Greens opposition.
Led by state premier David McAllister, the CDU and their Free Democrat (FDP) allies have drawn even in opinion polls with their opponents, each on 46 percent, even though the centre-right trailed by 13 points in voter surveys through mid-2012.
"The winds in Lower Saxony have turned and you can feel that everywhere you go," McAllister told German TV after a rally. First projections are expected once polls close at 6 p.m. and preliminary results are due within an hour.
Merkel, the most popular politician in Germany thanks to her handling of the euro zone debt crisis, hopes a victory for the centre-right in Lower Saxony, an industrial and farming heartland, would give her re-election campaign a boost ahead of the September federal vote.
The comeback in Lower Saxony has turned Germany's fourth-most populous state -- a genuine swing state -- into a ferocious battleground with Merkel appearing seven times to campaign with McAllister, the West Berlin-raised son of a British soldier.
McAllister, known as "Mac", has played up his Scottish roots in his campaign, which has featured bagpipes and the jingle "Our chieftain is a Scot/We're a tough clan".
The SPD and the Greens, who had long been comfortably ahead of the centre-right incumbents in polls, have watched in horror as their lead evaporated. Local SPD leader Stephan Weil has been hurt by gaffe-prone SPD chancellor candidate Peer Steinbrueck.
Weil, a solid if less colourful politician, is mayor of the state capital Hanover. He first embraced Steinbrueck during 2012 but has kept his distance since the SPD chancellor candidate blundered - complaining about the pay level for German leaders and saying Merkel has an advantage because of her gender.
Many would blame Steinbrueck if the SPD failed to take power in the state, raising questions about his candidacy and complicating his chances of dislodging Merkel in September.
In a sign of the party's nervousness, Steinbrueck and party leader Sigmar Gabriel met privately on Friday to discuss how to react to a defeat, German media reported.
Weil has pointed to polls showing a neck-and-neck race. The CDU were on 41 percent in a final poll on Thursday while the FDP were at the 5 percent threshold needed for seats in the state assembly. The SPD were on 33 percent and the Greens 13.
"Let's put this one in the bag," Weil told a Friday rally.
The CDU have suffered setbacks in the last 12 state elections and since Merkel's re-election in 2009 lost power entirely to the SPD and Greens in four important states: Hamburg; Baden-Wuerttenberg, North Rhine-Westphalia and Schleswig-Holstein.
But even if the CDU wins the most votes, their centre-right coalition could be defeated if the FDP does not clear the 5 percent threshold.
That is a similar problem to the one Merkel faces at the national level, where the CDU is well ahead of the SPD but doubts remain about whether the FDP will rise from the 4 percent they are getting in polls now.
Even though it is now considered likely the FDP will win at least 5 percent in Lower Saxony, FDP national leader Philipp Roesler could be forced to resign if his party falls short of or just scrapes past the threshold.