Chancellor Angela Merkel and her centre-left rival sparred over Europe's debt crisis and how best to keep Germany's economy strong as they faced off in a televised debate ahead of 22 September elections.
Challenger Peer Steinbrueck went into the 90-minute debate facing a sharp poll deficit.
Ms Merkel has benefited from a healthy economy, low unemployment and perceptions that she has managed Europe's debt crisis well.
She touted that record as the debate opened, pointing to high employment and portraying Germany as "the motor of growth" and "the anchor of stability" in Europe.
Mr Steinbrueck insisted that it makes no sense to apply a "deadly dose" of austerity to those struggling in the eurozone.
"It must come as part of a double strategy, by giving stimuli to these countries. Let's call it a 'Marshall Plan 2', that's fine by me," he said.
Germany is the biggest contributor to the 17-nation eurozone's rescue programmes.
Ms Merkel has pursued a hard-nosed approach, insisting that struggling countries get their finances in order, take responsibility for their own problems and enact economic reforms.
"What is important now is not to show false solidarity, but to follow a principle," said Ms Merkel.
"And this principle is? Solidarity and responsibility, and if we don't follow through on this we will see countries fail to regain more jobs."
On the home front, Mr Steinbrueck said he wants to ensure greater "social justice," introducing a mandatory national minimum wage - which Ms Merkel rejects, preferring sector-by-sector agreements between employers and employees.
"I am motivated by the image of a country which is economically strong because of social justice," he said.
Ms Merkel and Mr Steinbrueck both said they would not participate in military action against Syria.
The German Chancellor said they needed to wait for a UN or NATO (North Atlantic Treaty Organisation) mandate.
Mr Steinbrueck said he would not participate in military action as chancellor and would be disappointed if the US strikes alone without an international mandate.
Neither contender scored a knockout blow or made a major mistake and polls conducted by broadcasters showed no clear winner.
Recent surveys have given Ms Merkel's conservative bloc a large lead over Mr Steinbrueck's Social Democrats and suggested that her current centre-right coalition can hope to win re-election.
Mr Steinbrueck was Ms Merkel's finance minister in her 2005-2009 "grand coalition" of right and left.
Both insist they do not want a repeat coalition, but it could emerge from an indecisive election.