West Germany is quietly working to contain and choke off growing neo-Nazi violence.
To achieve this, the government says it needs to tighten the penal code to cut off a flow of Nazi propaganda coming into this country - mainly from the United States and Canada.
West Germany's Minister of Justice Jurgen Schmude said the neo-Nazis obviously have acquired sizable amounts of weapons and explosives ''and can count on a number of sponsors who, while not joining their organizations, are willing to make repeated donations to them.''
''But the various neo-Nazi organizations have so far been unable to unite organizationally on a national basis,'' he continued, ''not least because of different goals and because of the lack of a common ideology.''
Recent acts of neo-Nazism indicate their activities are on the rise.
* On Jan. 7, West Berlin police seized a cache of weapons and explosives hoarded by 12 teen-aged neo-Nazis.
* This past weekend, West Berlin police were looking at this group, as well as others, to see if they were connected with the recent bombing of an Israeli restaurant. Investigators, however, considered it more likely that Palestinians were responsible.
* Neo-Nazis in Stuttgart go on trial this week accused of terrorist acts.
* Last October, Munich police killed two neo-Nazis in a fire fight with a gang of five, while police near Hannover uncovered caches of explosives and weapons hidden by an active neo-Nazi there.
''Experience shows that the judicial instruments now available are sufficient to fight rightist extremists, in particular their criminal violence,'' Schmude said recently.
But, he pointed out that the penal code still contains loopholes enthusiastically used by neo-Nazi agitators, not least those in the US and Canada.
The penal code as now written makes it an offense to incite racial hatred by alleging, for instance, that Jews circulate lies about the Nazi gas chambers in order to win an award of compensation from the West German state.
''But there is an increasing number of publications which pretend to objectivity and often produce so-called 'evidence' they say disproves the historic fact of the annihilation of Jews by national socialism, but without connecting this with identifiable inflammatory attacks against Jewish citizens, '' Schmude said.
This loophole has allowed the publication and sale of several neo-Nazi works claiming to expose ''the Auschwitz myth.''
''The penal code therefore should in future also make the denial and the minimization of genocide and the distribution of such publications a punishable offense,'' Schmude said, announcing that he was submitting draft legislation.
Schmude said he will at the same time submit draft legislation to close the loophole used by American and Canadian neo-Nazi publishers to supply propaganda material, stickers, and Nazi emblems to West German rightists.
He named the main suppliers as Garry Rex Lauck, of Lincoln, Neb., who is head of the so-called NSDAP Foreign and Reconstruction Organization; George Dietz, of Reedy, W. Va., and his ''White Power'' publishing house; and Ernst Zuendel and his ''Samisdat'' publishing house of Toronto.
A judge in the Palatinate town of Zweibrucken this month issued an arrest warrant for Lauck. The judge had asked Lauck to appear as a witness in a case against one of the distributors of his neo-Nazi publications. Lauck refused on grounds he was a citizen of the United States.
The neo-Nazis have emulated the leftist terrorists in some ways, while differing substantially in others. Police experts say that while members of the Red Army faction and its off-shoots usually are individuals unrelated to one another. The neo-Nazi groups often involve entire families.