The victory of Chancellor Angela Merkel's conservatives in Sunday's election in Germany's most populous state has left her in a commanding position as she gears up for the national poll in September.
The Social Democrats (SPD) conceded defeat in Sunday's vote in North Rhine-Westphalia (NRW), and their regional chairman, Hannelore Kraft, resigned. But overshadowing Kraft's campaign for yesterday's election has been criticism of her government's handling of the 2016 New Year's Eve attacks on women in Cologne, as well a December terrorist attack on a Berlin Christmas market that was carried out by a one-time resident of North Rhine Westphalia.
The liberal Free Democrats, the CDU's preferred coalition partners, have bounced back to win nearly 13 per cent in NRW where the two allies are expected to have enough seats in the regional parliament to muster a majority.
Mr Schulz told reporters in Berlin: "This is a hard day for the Social Democrats, a hard day for me personally as well. I come from the state in which we took a really stinging defeat today".
But he urged the party to concentrate on the national election.
"We will continue fighting; the result will come on September 24", Schulz said.
It dealt a huge blow to new SPD leader Martin Schulz, who in February and March had boosted the party's poll ratings and raised its hopes of ending Merkel's 12 years in power.
"His immediate task now will be to relaunch the so-far exclusively personality-driven SPD campaign for the Bundestag elections; the party immediately needs to start focusing on policies to widen the SPD's appeal beyond its core electorate".
The Green Party, which has dropped to a 15-year low in national opinion polls also fell back sharply, reaching just 6% of the vote and putting an end to the red-green coalition in Duesseldorf.
Sunday's elections were widely seen as a test of support for Merkel and Christian Democrats in the run-up to the national elections on September 24.
Germany's right-wing nationalist party, Alternative für Deutschland, won a little over 7% of Sunday's vote and will therefore have representation in the NRW parliament.
The Left Party, meanwhile, failed to clear the 5-percent hurdle to enter the state parliament, with results showing the party at 4.9 percent.
The result gives the CDU and Free Democrats a very slim majority.
Acknowledging voters' fears, Merkel's grand coalition of conservatives and the SPD has tried to speed up the processing of asylum requests, stepped up deportations and banned the burqa full face veil for state employees at work.
North Rhine-Westphalia, Germany's biggest regional economy, has tripped up the Social Democrats before.
Mr Schulz, who held more than 30 rallies in the state, had hoped that his push for "social justice" would resonate in NRW, which has lagged behind western Germany economically.
Mrs Merkel's party seemed keen not to appear too euphoric, insisting that regional issues played the key role.
"We're in much better shape now than we would have thought 10 weeks ago", Peter Altmaier, Merkel's chief of staff in the chancellery, told reporters.