In an embarrassing setback for Chancellor Gerhard Schroeder, the German high court Tuesday threw out a government bid to ban a far-right political party, declaring that the state's evidence was tainted.
The decision marked the end of a high-profile two-year campaign by Schroeder's administration to outlaw the National Democratic Party, or NPD, which the government accuses of inciting racial hatred and anti-Semitism and of whitewashing the Holocaust.
Winfried Hassemer, the presiding judge of Germany's Federal Constitutional Court, said the government's case had been irretrievably compromised by its use of testimony from party members who were paid to infiltrate the NPD's leadership and report back to investigators.
The reliance on informants created a "lack of clarity that can no longer be overcome," Hassemer said in tossing out the case.
Only three of the seven jurists, including Hassemer, voted to abandon the hearings, but that was enough to end the proceedings, which needed the approval of two-thirds of the panel to carry on.
The fact that its case simply fizzled was a defeat for a government that had poured considerable resources and political capital into pressing for a ban. Critics compared the NPD to the Nazis, whose atrocities still cast a large shadow over German politics and society.
But in its attempts to prove the party extremist and eject it from the political register, the government found itself citing testimony and speeches made by its own informers at NPD meetings and rallies. It eventually acknowledged employing at least 30 informants but insisted that they didn't serve as agents provocateurs, and it refused to name them in court.
"A disclosure of sources would mean serious harm for the future work" of Germany's domestic intelligence services, Interior Minister Otto Schily said after the decision Tuesday.
"There has been enough material in open sources to ban this party," Schily added. "It is pure anti-Semitism in organized form."
With only about 6,500 members, the NPD inhabits the political fringe here and holds no seats in Parliament. The party draws much of its strength from the rising xenophobia -- especially in the former East Germany -- among Germans who blame foreigners for stealing jobs during the current economic slump. Anti-Jewish statements also salt the party's rhetoric.
The NPD describes its mission as one of restoring German "national" values, which it says are under threat from immigrants.
"This is a victory toward a better Germany," Udo Voigt, the head of the party, told reporters after the decision. "The party will press ahead massively in its political work."
That is precisely what worries its critics. As an officially listed party, the NPD is entitled to receive state funds, claim tax-exempt status, campaign during elections and organize rallies and demonstrations.
Its opponents fear that neo-Nazis will start flocking to the NPD now that it has been cleared to continue operating legally and can provide political cover for racist activities ordinarily proscribed by German law.
"This party is not a danger in an electoral manner. You cannot expect that the NPD will gain more than 5%" of the vote, said Alfred Schobert, an expert on right-wing extremism at the Duisburg Institute for Linguistics and Social Research.
"The danger is that ... the neo-Nazis can organize their manifestations and demonstrations with the party privilege. Normally, you can ban a demonstration by Nazis, but if it is a demonstration by the NPD, it can be difficult, even impossible, to ban it, because you cannot stop a party when there is an election campaign," Schobert said.
Schobert was also critical of the government's tactics in the case before the high court.
"The secret services are more important for them than the ban of this party," he said.
But Schily, Germany's top law enforcement official, blamed the dissenting judges for imposing such onerous conditions on evidence that the state found it impossible to present its case. The government is not expected to try again.
Only two parties have been declared unconstitutional in western Germany since the end of World War II.
The first was a resurrected Nazi Party with a different name, and the second was the Communist Party. Both were outlawed in the 1950s.