By Michael Nienaber BERLIN (Reuters) - Germany's eurosceptic AfD party, which has been snatching away votes from Chancellor Angela Merkel's conservatives, may suffer a setback in a regional election on Sunday if it fails to clear the 5 percent hurdle in the city-state of Bremen. Germany's final local election of 2015 before a crowded vote calendar next year is also a key test for the recovering pro-business Free Democrats (FDP), who are eager to return to parliament in 2017 as a potential coalition partner for Merkel. The Alternative for Germany (AfD), founded in 2013 opposing eurozone bailouts for states such as Greece, has recently been in decline, wracked by infighting and an east-west split. In Bremen, polls put both AfD and FDP at the 5 percent threshold needed to win seats in the state assembly.