By Madeline Chambers
BERLIN (Reuters) - Germany took a step towards banning the far-right National Democratic Party (NPD) on Wednesday when politicians formally recommended going ahead with hotly disputed legal proceedings as dozens of right-wing party backers boldly demonstrated outside.
Calls for a ban of the NPD, which critics say is inspired by Hitler's Nazis, have grown since it emerged last year a neo-Nazi cell had waged a racist killing spree over nearly a decade.
But suppressing a political party is an especially controversial act in Germany, haunted by memories of Nazi and communist regimes which silenced dissent. An attempt to ban the NPD in 2003 collapsed because informants high in the party were used as key witnesses.
The interior ministers of Germany's 16 states announced their recommendation to pursue a ban, which will involve filing a case with the Constitutional Court in Karlsruhe.
"We believe we've got better evidence against the NPD than in 2003," Interior Minister Hans-Peter Friedrich told a news conference in the Baltic resort of Warnemuende.
"There's a political risk that we could help revive the fortunes of a party that is already fading," he said. "Everyone will have to ask: what will the propaganda value of this be for the NPD?"
NPD supporters protested outside the meeting of interior ministers. Earlier NPD chairman Holger Apfel told a separate news conference that he was confident the ban would fail again.
"We're looking forward to the proceedings," Apfel said, speaking in front of a banner reading "Out of love for our homeland." He added: "A party that has not done anything forbidden cannot be banned in a state based on the rule of law."
Lorenz Caffier, the conservative interior minister of Mecklenburg-Vorpommern who chaired the meeting, said the ministers were confident they had enough evidence the NPD was a danger to Germany's constitution.
"This shows that democracy in Germany is able to defend itself," Caffier said. "We can prove that the NPD is an anti-constitutional party."
The opposition Social Democrats (SPD) have pushed for the ban despite reservations from some conservatives, including Chancellor Angela Merkel, who is worried the NPD could be strengthened if a second bid fails. Other opponents argue a ban could push the NPD underground and make it more dangerous.
The leader of Germany's Jewish community, Dieter Graumann, welcomed the move to ban the NPD, which would disqualify the party from public funding based on their electoral support.
"It's high time that the unspeakable activities of the NPD be brought to an end. It's simply unbearable that right-wing extremists get taxpayer money to spread their propaganda."
Germany's domestic intelligence service has described the NPD as "racist, anti-Semitic and revisionist" and says it aims to abolish democracy. The party calls the German constitution a "diktat" imposed by victorious Western powers after 1945.
More radical than populist anti-immigrant parties in France, Britain and the Netherlands, the NPD has seats in two state assemblies in eastern Germany and receives around 1 million euros ($1.3 million) per year in taxpayers' funding.
Believed to have fewer than 10,000 members, it campaigns for full employment, greater national sovereignty in defense and foreign matters and an end to immigration. Critics accuse it of unofficial links to racist and violent groups.
To help the case, German authorities have severed relations with informants in the top levels of the NPD and compiled more than 2,000 pages of evidence to back their case.
Experts say that to ban a party it has to be proven that it has an actively belligerent, aggressive stance and aims to abolish democracy.
The NPD last month filed a case with the court asking it to declare it constitutional, a move widely seen as an attempt to pre-empt any ban. Karlsruhe still has to rule on that.
"Democracy and the rule of law are not one-way streets and the NPD is not unconstitutional but stands firmly with two feet on the Basic Law (constitution)," the NPD says on its website.
The ministers' recommendation needs approval from state governors, expected on Thursday, before a vote in the Bundesrat upper house, which represents the 16 states, on December 14.
It will then take up to three months for the case to be prepared for sending to Karlsruhe. It is unclear whether the court could rule on the case before elections in September.
Germany's failure to uncover the Nationalist Socialist Underground (NSU) cell of neo-Nazis who killed foreigners between 2000 and 2007 has sparked accusations that it underestimated the danger from the far right for many years.
The NPD has denied any links with the NSU but experts say informally there is overlap between the political party and social clubs and groups who recruit youngsters to the far-right cause, especially in the impoverished ex-communist East.
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(Additional reporting by Sabine Siebold and Erik Kirschbaum; Editing by Gareth Jones and Andrew Roche)