UPDATE 4-Merkel party suffers fresh election setback in Berlin
* Chancellor Merkel's party beaten for 6th time in 2011
* Social Democrat mayor Wowereit wins third term
* FDP crashes out of Berlin assembly with 2 percent (Updates after first exit polls)
BERLIN, Sept 18 (Reuters) - Germany's centre-left Social Democrats beat Angela Merkel's conservatives in a regional election in the city-state of Berlin on Sunday, handing the chancellor her sixth defeat in seven elections this year.
The SPD won 29.5 percent of the vote in Berlin, down from 30.8 percent in 2006 in Germany's largest city with 3.4 million inhabitants, according to an exit poll on ARD television.
SPD Mayor Klaus Wowereit appeared to be headed for a third five-year term, with the Greens as his most likely coalition partner. It was another bitter defeat for Merkel's CDU ahead of a crucial euro zone rescue vote in parliament in two weeks.
The CDU won 23.5 percent, up slightly from 21.3 percent in 2006 but well below the 40 percent the party used to win in Berlin in the 1980s and 1990s. The Greens won 18 percent, up from 13.1 percent in 2006, and the Left party fell to 11.5 percent from 13.4 percent.
The Pirate Party, running on a campaign for reform of copyright and better privacy in the Internet age, came out of nowhere to win a stunning 8.5 percent.
Merkel's centre-right coalition suffered more bad news in the Berlin election when their junior coalition partners at the national level, the Free Democrats (FDP), failed to clear the five percent threshold for getting a seat -- the fifth time in this year's series of elections. The FDP plunged to 2 percent, down from 7.6 percent in 2006.
Merkel, under fire for her hesitant leadership in the euro zone crisis, is halfway through a four-year term. But election setbacks for her CDU have hurt her standing before the vote on euro zone measures in parliament at the end of September.
"I never really liked Merkel anyway, and she doesn't seem to be doing a good job leading at all," said Claudia Barre, 31, an insurance sales woman on her way to vote.
The SPD, in opposition at the national level since 2009, wants likely re-election in Berlin on Sunday to build up momentum to oust Merkel in the next federal election in 2013.
The SPD has ousted or helped defeat the CDU in Hamburg and Baden-Wuerttemberg this year and remained in power elsewhere.
The CDU has lost six of seven regional votes this year, holding on to power only in the eastern state of Saxony-Anhalt. The fresh loss in Berlin will add to Merkel's woes before a Bundestag vote on Sept. 29 to give the European Financial Stability Fund (EFSF) more powers.
(Reporting by Erik Kirschbaum, Stephen Brown, Alexandra Hudson and Natalia Drozdiak)