BERLIN (Reuters) - Germany is struggling to contain an embarrassing and potentially explosive debate on the Holocaust, just as it prepares to join other nations in commemorating the victims of Nazi aggression at Auschwitz.

The far-right National Democratic Party (NPD) provoked outrage on Friday by walking out of a minute´s silence for Nazi victims and referring to Allied strikes on the German city of Dresden in 1945 as a "bombing holocaust."

Now the government, which failed in a previous attempt to ban the party, is under pressure to act, with opposition conservatives pushing for a rapid response.

The debate is raging as German President Horst Koehler gets set to join leaders from Poland, France, Russia and Israel at commemorations on Thursday to mark the 60th anniversary of the liberation of the Auschwitz concentration camp.

"There´s no doubt it´s an embarrassment," said Wolfgang Wippermann, a professor at Free University in Berlin and expert on the far right. "The government has to show its teeth." Interior Minister Otto Schily has decided against another attempt at banning the NPD, which the government has likened to Adolf Hitler´s nascent Nazis.

Instead, he is pushing ahead with plans to limit the right of far- right parties to demonstrate.

But this proposal has also encountered resistance within the ruling coalition of Social Democrats and Greens, with some politicians warning against tinkering with a law they view as sacrosanct.

"We must place a very high value on the right of assembly. Although it is sometimes difficult, we should recognize that even right-wing extremists are protected by our laws," Social Democrat parliamentarian Sebastian Edathy told German radio on Wednesday.

Now Schily is trying to garner support for a change in the law which would prevent right-wing extremists from gathering near Jewish and World War II memorials.

QUESTIONS ABOUT GUILT

The debate comes at a time when some Germans, particularly in the depressed east, are questioning whether they should be made to feel responsible for atrocities committed over half a century ago.

Chancellor Gerhard Schroeder, the first German leader with no personal memory of the war, said in a speech on Tuesday that Germans bore a "special responsibility" for the Holocaust.

But a survey published in Stern magazine on Wednesday suggested that a solid majority of Germans do not feel guilty.

In the survey, conducted by the Forsa institute, 74 percent of over 1,000 respondents said they did not believe Germans today needed to feel guilty for killings at Auschwitz, compared to 20 percent who said they should.

Wippermann said the government had to demonstrate it was serious about the far-right threat, but was skeptical about the extent to which laws could change underlying currents in society.

"The NPD is the tip of the iceberg," he said. "The problem is that in the east the political discourse is very right-wing oriented. There are many people who have come to see the Germans as the victims and that is partly a legacy of the (former East German government) GDR."

The NPD won 9.2 percent in the Saxony state election in September, giving it seats in the state parliament and an official forum from which to express radical views.

Earlier this month, it signed a cooperation pact with another far- right party, the German People´s Union (DVU), pledging to fight under one banner in the 2006 national poll.

Still, most commentators believe the far right will struggle to win the five percent support required to enter the German Bundestag. (© Reuters 2005 01/27/05)