Media in Germany reported that Schulz, leader of the center-left SPD party, informed colleagues on Tuesday, January 24, of his decision not to stand against Merkel in the September vote.
"If I were to run, I would fail," Gabriel was quoted as saying by Stern magazine.
Sigmar Gabriel won't be SPD chancellor candidate. "If I were to run, I would fail", he tells @sternde. He says Schulz should run instead.
— Vincenzo Scarpetta (@LondonerVince) January 24, 2017
German newspaper Zeit reported that Gbriel, who also doubles as economy minster in the CDU/SPD coalition government, would nominate Schulz to take over the party's leadership.
The reports come as a major surprise after Gabriel appeared all but certain to challenge Merkel at this year's election.
Breaking: former EP-President Martin #Schulz will run for chancellor. #Gabriel will resign, will become foreign minister — Media #SPD
— Dirk-Oliver Heckmann (@DirkOHeckmann) January 24, 2017
Despite enjoying support among his own party colleagues, there were concerns that Gabriel's role as Vice-Chancellor in the Merkel-led coalition government would see him struggle to satisfactorily differentiate his party from Merkel's CDU.
The decision now opens the door for former European Parliament President Schulz to turn around the fortunes of the SPD and challenge Merkel in this year's election, to be held in either September or October.
#GERMANY: former EU parl president #Schulz replaces vice chancellor Gabriel as soc dem's candidate against #Merkel. Better chances for #SPD.
— Philipp Liesenhoff (@P_Liesenhoff) January 24, 2017
Schulz has a strong public profile in both Germany and Europe after five years as the parliament's chief, and is expected to represent a far more dangerous challenge to Merkel's premiership than Gabriel.