Martin Schulz urgently needs to win back voters after a disastrous election loss on Sunday in Germany's most populous state of North Rhine-Westphalia, the SPD's third defeat this year and one he called a blow to the party and him personally.

In a speech in a library in the Berlin district of Neukoelln where 14 percent of pupils leave school with no qualifications, Schulz set out one of his most concrete proposals since being chosen as leader in January.

"Whoever doesn't invest in education gambles away the chances for future generations," he told the audience, which included teachers and pupils. "...In education we can do more."

He cited Organisation for Economic Cooperation and Development figures showing education spending in Germany was 4.3 percent of gross domestic product, below the 5.2 percent average in OECD member countries.

He promised to invest some 30 billion euros ($33.4 billion) to surpass the average, without giving a timeframe.

Schulz, who failed to complete his secondary education and became a bookseller before working his way up through local politics, criticised Merkel's Finance Minister Wolfgang Schaeuble for refusing to spend his budget surplus on schools.

"It is more sensible to invest in education than having tax cuts or pouring double-digit sums into armaments," he said to applause from the otherwise quiet audience.

Soon after being nominated as the SPD candidate to run against Merkel, who is seeking a fourth term after 12 years in office, Schulz dragged his party up some ten points to be neck-and-neck with the chancellor's conservatives.

But his focus on social justice has failed to resonate and the SPD now trails the conservatives by about 8-10 points in most polls. The two parties are partners in a coalition government, and many analysts expect the same alliance to emerge after the Sept. 24 election.

Schulz, a former President of the European Parliament, also promised to extend full-day schools and have better coordination between central government and the 16 federal state governments responsible for education.