Berlin - Germany's Social Democratic Party (SPD) reshuffled its leadership a year ahead of federal elections, during a meeting of top party leaders near Berlin Sunday.

The party nominated Foreign Minister Frank-Walter Steinmeier to challenge Angela Merkel for the chancellorship and summoned back as chairman veteran Franz Muentefering.

Making the announcement at Werder, south-west of Berlin, Steinmeier said Kurt Beck, the long-serving premier of Rhineland- Palatinate, who has led the party since 2006, had resigned as chairman.

Steinmeier, who spoke of a "difficult day" for the party, is to serve as interim chairman until the SPD formally votes in Muentefering at an extraordinary general meeting to be held in the weeks ahead.

The party was better equipped than many believed and was ready for the election campaign, Steinmeier said.

"We do not want anyone to be marginalized in our society," he said, signalling the tone of the SPD campaign.

Although it had long been anticipated that Beck would yield to Steinmeier as the candidate for chancellor, his resignation as SPD federal head took observers by surprise.

Steinmeier regularly tops the polls as the most popular German politician, although he lacks Beck's political credentials within the SPD.

Muentefering, 68, resigned as deputy chancellor last year to care for his terminally ill wife. He was party chairman in 2004-05.

Steinmeier, who took over as deputy chancellor under Christian Democrat Chancellor Merkel, is seen as on the right of the SPD.

As a close confidant and chief of staff to Merkel's predecessor, former SPD leader Gerhard Schroeder, he is closely associated with Schroeder's Agenda 2010 economic reform programme that is rejected by many on the SPD's left wing.

Steinmeier's nomination to lead the SPD into the September 27 elections next year comes with the traditional party of the German left ailing in the polls at around 25-per-cent support, against above 35 per cent for Merkel's conservative Christian CDU/CSU bloc.

Since last year, the SPD has faced an increasingly strong challenge on the left from the newly formed Left Party, which has its main support base in the formerly communist eastern states but has also made a strong showing in state elections in western states.

Following his wife's death, Muentefering signalled his comeback last week with a rousing speech to SPD members in Munich, ahead of elections in the southern state of Bavaria at the end of this month.

Another close Schroeder associate, he made clear his backing for the Agenda 2010 programme in his address, calling on SPD members to be proud of the programme's achievements in cutting unemployment and moving the state finances towards balance by 2011.

On Saturday, Merkel lashed out at the SPD, the junior partner in her grand coalition government, calling the party "unreliable" and expressing the hope that the CDU/CSU will be able to form a coalition with the minority liberal FDP following the next elections. (dpa)