On Saturday, NPD leader Udo Voigt welcomed delegates to the national party convention in the "Capital of the Reich, Berlin." After meeting in obscure provincial towns in previous years, NPD officials for the first time had fought in court to hold their annual gathering in Germany's largest city.

"Our time has come," Voigt said, still basking in the recent election success in the northern state of Mecklenburg-Western Pommerania.

Journalists observing the two-day convention were only allowed to stay for a few hours -- possibly because delegates had to deal with the issue of looming financial problems.

The NPD will likely have to pay back about 870,000 euros ($1.1 million) in state subsidies the party received based on fraudulent donations. In Germany, state subsidies for parties partially depend on the amount raised via donations.

Before closing the convention to the public, Voigt did concede that the potential repayment presented a problem.

"We'll have to tighten the belt," he told reporters at a press conference, according to Der Tagesspiegel, adding that mortgages on real estate owned by the party, administrative personnel cuts and loans by supporters would all be considered.

Money's not an issue

A potential donor is millionaire Gerhard Frey, the leader of the German People's Union (DVU), who reiterated the need for a unified "people's front" at the NPD convention.

DVU and NPD leaders have formed an alliance that includes an agreement not to run against each other in elections. While the NPD is now represented in Saxony and Mecklenburg-Western Pommerania, the DVU has seats in the state parliaments of Brandenburg and Bremen.

Hajo Funke, an expert on right extremism, said Frey and other wealthy neo-Nazis were likely to bail out the NPD.

"There's enough money to settle this," said Funke, a professor of politics and culture at Berlin's Free University, adding that he didn't see the potential repayment of state subsidies as a real threat to the NPD's survival.

But a former NPD member said that the scandal had the potential to harm the party.

"Apart from the financial damage, this also hurts internal cohesion within the group," said Jan Zobel, who served as spokesman of the NPD's youth organization before breaking with the far right in 2001.

"I'm really surprised that this is only now becoming public," said the 30-year-old author of "A People on the Edge," a book on the NPD's leaders, politics and perspectives.

"I'm sure more rascalities will come to light," he added.

Boost by banning?

Saturday's party convention meanwhile has also led several leading politicians from Germany's democratic parties, including Vice-Chancellor Franz Müntefering and Berlin Mayor Klaus Wowereit, to call for a new attempt to ban the NPD. In 2003, Germany's highest court rejected banning the party because the federal government refused to lay open the extent of the NPD's infiltration with intelligence agents.

But both Funke and Zobel agreed that this latest initiative was counterproductive. Instead of talking to the media about a ban, politicians should first come up with a sound strategy.

"This chaos really isn't helping -- it's neither professional nor responsible," Funke said, adding that a ban of the NPD would not solve the problem of an increasing sentiment of frustration and xenophobia among the population.

"Politicians really have to tackle the social erosion and equip democracy with a bit more sex appeal by really listening when people come to them with their problems," he said.

Simply banning the NPD might actually strengthen Germany's neo-Nazis, who could regroup within the DVU or in a new party.

"The NPD is a bit of a stumbling block for itself that prevents it from growing," Zobel said, adding that the party's ultra-extremist image kept many sympathizers from voting for it.

"I'm afraid this could lead to the establishment of something like the FPÖ," he said, referring to Austria's far-right movement, which -- at its peak -- won more than 20 percent of votes in national elections.