A suspected accomplice (C) of a neo-Nazi cell is escorted by police at the Bundesgerichtshof in Karlsruhe November
A suspected accomplice of a neo-Nazi ring is escorted by police to the Bundesgerichtshof, or Federal Court of Justice, in Karlsruhe, Germany, in November. (Reuters)

German authorities have arrested a man suspected of involvement in a neo-Nazi cell discovered last month.

Prosecutors said that Matthias D was arrested in Erzgebirgskreis, an area in the eastern state of Saxony, for his alleged involvement in a group which calls itself the Nationalist Socialist Underground (NSU), which is believed to be responsible for the deaths of at least 10 people from 2000-2006.

The 36-year-old man is accused of having assisted the far-right group on two occasions. "He is suspected of providing two flats in Zwickau (Thuringia) to the members of the NSU as permanent accommodation," a statement by the Federal Prosecutor's Office said.

A report released in Germany last month by the public broadcaster ARD suggested that the country's far-right National Democratic Party (NPD) may have formed close links with violent gangs.

The reporter received widespread media attention and has renewed bids to outlaw the NPD, a move sought by a number of MPs and experts on far-right activities in the country.

While it has yet to be established whether the NPD actually had links with the NSU, which is believed to be responsible for a series of terrorist bombings and ethnic killings over the past decade, the report showed clear evidence that the party had ties with underground groups like Sturm 34, Skinheads Sächsische Schweiz and Thüringer Heimatschutz.

"NPD always had a fluid relationship with the more confrontational and provocative side of far-right movements, especially on a local level," Dr Matthew Goodwin, an expert on extremism at Nottingham University, told the International Business Times UK. "The latest developments may show that the party had more links to banned neo-Nazi groups, which would be further grounds towards banning the party."

Dr Goodwin said that previous attempts to ban the organisation failed because the prosecutor did not have the hard evidence to back up its claims and witnesses were exposed as being intelligence agency informants.

The news magazine Der Spiegel reported that the German intelligence agency has more than 130 active informants in the NPD, who risk exposure if the government moves to ban the far-right party.

The revelation has led many politicians to urge caution in any attempts to outlaw the party.

The NSU terror cell was uncovered last month when two of its three members committed suicide following a failed bank robbery and a third surrendered to police.