The man who is challenging Angela Merkel to become chancellor of Germany has called for a new Marshall Plan to revive Europe's ailing economies.

Peer Steinbrueck said in his first major foreign policy speech Tuesday at Berlin's Free University that such a program could be funded in part by new taxes on financial transactions.

He added that the government's insistence on budget austerity in Europe is creating economic stagnation.

Steinbrueck's Social Democratic Party is trailing Merkel's Christian Democrats in the polls three months before the Sept. 22 general election.

The former finance minister said countries like Greece and Portugal need a massive plan similar to the one that rebuilt Germany after World War II to avoid a "diabolical spiral" toward further joblessness and economic stagnation.