Exit polls showed on Sunday that German Chancellor Angela Merkel's Christian Democratic Union (CDU) party has won North Rhine-Westphalia state election. In a similar region election in Schleswig-Holstein on May 7, the CDU emerged with 33 percent of votes to the SPD's 26.2.
Voters in North Rhine-Westphalia yesterday handed Schulz's SPD just 31.2 per cent, sharply less than the 39.1 per cent it garnered five years ago, final results showed.
It was not clear if the liberal Free Democrats (FDP), the CDU's preferred partners projected to win 12 percent, had enough votes for the two allies to form a majority in the state.
And the nationalist Alternative for Germany, or AfD, hopes to enter its 13th state legislature - though its popularity appears to have faded as the migrant influx has receded and the party has been rent by infighting.
But the conservatives, who have now defeated the SPD in three state elections since the end of March, are hoping to build on the momentum in the run-up to the federal vote on September 24, where Merkel is seeking a fourth term.
Schulz said he has learned from Sunday's loss and signaled that's he's ready to answer critics who say he's too agreeable and lacks substance.
"We suffered a hard moment last night", said Schulz today at the SPD's headquarters.
"If Kraft succeeds, then the chances of the SPD's bid to take back the chancellery grow".
Schulz, who's challenging Merkel on a platform of greater income equality, saw his party defeated in his home state of North Rhine-Westphalia on Sunday in the last test before the national ballot.More news: Trump interviews 4 candidates to post of FBI director
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In the NRW campaign, CDU candidate Armin Laschet criticised for failing to tame a rise in crime and fix the state's crumbling roads, frustrating Germans who like to drive on the extensive autobahn network where long stretches have no speed limit.
The western state, which includes Cologne, Duesseldorf and the Ruhr industrial region, has been led by the Social Democrats for all but five years since 1966.
After 18 months of turmoil in Europe with the eurozone crisis, Brexit and the rise of the right win across the bloc, the Chancellor will undoubtedly looking for signs of support. The party landed an unprecedented victory past year by defeating Merkel's party in her home state of Mecklenburg-Vorpommern.
After casting his vote in his hometown of Wuerselen, Mr Schulz acknowledged yesterday that the race would be close, with 30 per cent of voters deciding their pick at the last minute.
Asked about Germany's government after September her chief of staff, Peter Altmaier, said: "We always have to keep a cool head. we shouldn't talk about coalitions before the harvest is in".
Germen Chancellor Merkel's party beat its rival Social Democrats in their stronghold in North Rhine-Westphalia, Deutsche Welle reported.
The SPD have now lost three regional elections to the CDU.
State interior minister Ralf Jaeger has faced criticism for failing to detain Anis Amri, the Tunisian asylum seeker suspected in the deadly Berlin Christmas market rampage past year. Publicly, they'll likely try to dismiss this as a purely regional vote on regional issues - the party's top regional candidate, Hannelore Kraft, announced she would step down from the party leadership - but there seems to be a near-consensus that Schulz' campaign needs an overhaul.