Leftist rival says Germany has lost direction under Merkel

* SPD leadership confirms Steinbrueck as party candidate

* Former minister says 'pilot' Merkel lacks direction

* Steinbrueck promises to inject humour into campaign

By Noah Barkin

BERLIN, Oct 1 (Reuters) - Angela Merkel's main challenger in next year's German election said on Monday the chancellor had failed to set out a clear vision for Europe and likened her to a plane pilot who has forgotten to tell her passengers where they will land.

Peer Steinbrueck, a feisty former finance minister who served under Merkel in her first term, was formally nominated on Monday by leaders of the centre-left Social Democrats (SPD) to take her on in a vote one year from now that is likely to be dominated by the euro crisis.

Opinion polls show the SPD trailing Merkel's conservative bloc by double digits, but Steinbrueck said he welcomed the challenge and would lure voters with a campaign that mixed humour with pointed criticism of the incumbent's policies.

"I like being in an airplane with Frau Merkel," he told reporters at SPD headquarters in Berlin, borrowing an analogy used by one of his party colleagues.

"She can fly the airplane. Mechanically, everything is tip top. Technically, she has excellent control over the airplane. I can even sleep well and feel secure. But I don't know where I'm going to land. And this is the decisive point.

"We don't know where we land with her," he continued. "What role should Germany play in and with Europe when you look beyond this crisis? It is vague."

Merkel has emerged as Europe's dominant leader over the course of a three-year-old crisis that has seen Greece, Ireland and Portugal bailed out by their European partners. But she has been criticised abroad for not spelling out where she wants to take the bloc, beyond murky rhetoric about political union.

Nevertheless, at home her steady crisis management and tough stance towards struggling southern euro states has made her highly popular.

Because of that, the SPD is likely to emphasise other issues in the election campaign. Steinbrueck unveiled proposals last week to break up big banks he said were a danger to the economy and said on Monday that "social justice" would be at the centre of his drive to unseat Merkel.

Here too, Merkel has moved to protect her flanks. Her Christian Democrats (CDU) have broken with past policy and are pushing a minimum wage. They are also promising new ideas to combat poverty among the elderly, leaving the SPD even less room to score with voters.

During the "grand coalition" Merkel led from 2005 to 2009, in which Steinbrueck served as finance minister, the SPD saw its own poll ratings suffer. That has made the party deeply reluctant to partner with her again, even if another right-left partnership looks the most likely outcome of the 2013 vote.

"Frau Merkel is very good at grabbing hold of themes where she thinks she can outdo the SPD and neutralise or demobilise social democratic voters. We aren't going to allow this," Steinbrueck said.

(Reporting by Noah Barkin; Editing by Janet Lawrence)

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Keywords: GERMANY MERKEL/CHALLENGER