Three alleged neo-Nazis who spent 13 years on the run are suspected of terrorism and the killings of nine shopkeepers of Turkish and Greek origins and one policewoman, German prosecutors said Friday.
"There is sufficient evidence that the murders may have been the work of a far-right group," federal prosecutors said in Karlsruhe, dpa reported.
A 36-year-old woman, the sole survivor of the trio, was being investigated for murder, membership of a terrorist group and arson, police said.
Two men, aged 38 and 34, who killed themselves in an apparent suicide pact on November 4, are also suspected.
Police have yet to say who pulled the trigger, but suspect the gang of shooting the nine shopkeepers in unsolved hate crimes that lasted from 2000 to 2006.
They are also suspected of killing a 24-year-old policewoman and critically wounding a policeman in a 2007 attack in Heilbronn.
The three changed names as they moved around Germany and allegedly financed themselves by robbing banks.
Ballistics experts linked a handgun found in the trio's home to the killings of owners of takeaway food, florist and newspaper shops, who were shot at point-blank range.
The killings spread fear in the 3 million people of Turkish origin living in Germany.
Police suspect all the victims were chosen simply because they looked Turkish.
In German law, the crime of terrorism covers anyone setting up or joining a group for purposes that include murder. Acts designed to intimidate the populace are also regarded as terrorism.
The woman allegedly set the trio's first-storey apartment in the eastern city of Zwickau alight before turning herself in to police.
In the ruins, police found a 7.65-millimetre Ceska pistol that was used to kill the shopkeers as well as neo-Nazi propaganda videos.
Police sources told dpa the videos referred to the murders and to a group calling itself the National Socialist Underground.
The bodies of the two men were found inside a burning camper van in the city of Eisenach. Police also found two police-issue pistols stolen when the policewoman was killed.
SWR television said police believe one of the robbers shot the other in the belief that they were about to be caught after a bank robbery in Eisenach, then shot himself.
They said the woman, who was in Zwickau at the time, phoned their relatives just afterwards to inform them of their deaths. This indicated they had made a farewell telephone call to her before turning their guns on themselves, police said.
While in their early 20s, all three were active in a neo-Nazi group calling itself Thuringia Homeland Protection or THS, police said.
"Extreme rightists have turned into terrorists. We have to do something about the fact that these perpetrators could operate underground in Germany for years on end," said Ralf Jaeger, interior minister of North Rhine Westphalia state.
He said police believe other neo-Nazis may have been involved, but a newspaper, the Sueddeutsche Zeitung, quoted security sources as saying there was no evidence of a wider conspiracy.
Bernhard Witthaut, president of the GdP police union called for national authorities to use "every available" capacity to root out any more neo-Nazis connected to them.
"If the evidence is true, an extreme rightist terrorist cell has for the first time created a horrific trail of blood," he said.
The three suspects vanished in 1998 just as police were to arrest them for posting three letter-bombs, none of which were primed to explode. Those incidents were allegedly neo-Nazi attempts to intimate authorities and a newspaper in the eastern city of Jena.
Police had no clue at the time to the identity of the Heilbronn attacker. The inquiry was botched when DNA "evidence" at the scene was discovered to have come from a factory worker who had come into contact with cotton buds used to collect samples.