Merkel challenger urges more time for Greece

He said his party would not on principle oppose a third bailout for Greece, but it would depend on the conditions attached.

A Greek eurozone exit, however, would be "devastating" as it would have severe economic consequences, said the former minister of finance, who served in coalition government with Merkel in 2005-2009.

Steinbrueck said Merkel "must finally tell German people the truth: Greece will not be able to borrow money on the capital markets in the coming seven or eight years. We will have to help it until then."

But his views may not be as popular with the public, which still overwhelmingly prefers Merkel and her tougher stance on Greece.

An opinion poll published by Bild last week showed Steinbrueck's SPD party at 37 percent, 10 points behind Merkel's Christian Democrats. And some two thirds of respondents said they did not expect him to replace Merkel as chancellor next year.

With one year to go before the elections take place, Steinbrueck still has plenty of time to catch up in the polls. For now, he is also rejecting a remake of the grand coalition with the Christian Democrats.

"We want to oust this government. We want to make sure it isn't just partially replaced but completely replaced with an SPD-Greens government," he said at a press conference on Friday.

In a bid to put some content into his campaign, Steinbrueck has tabled a paper on banking reforms including a financial transactions tax and a single banking supervision for eurozone banks.

For the SPD, the paper is "a big step in taking on the powerful and aggressive bank lobby," said Ernst Dieter Rossmann, an SPD member of the Bundestag. "He's got our full support on that."