A wave of neo-Nazi killings of immigrant shopkeepers threatens to tarnish Germany's image around the world and is an assault against its democratic foundations, Chancellor Angela Merkel said Wednesday.

In a forceful speech to parliament, Merkel said police had made many mistakes in failing to stop or even detect the band of neo-Nazis who shot nine immigrants and a German police woman at close range during a mysterious murder spree from 2000 to 2007.

We're horrified by the extent of this hatred and racism, Merkel told the Bundestag one day after deputies from all six parties condemned the killings by right-wing extremists in a rare cross-party display of unity.

It's a shock for our country and a danger to our standing in the world, Merkel said before reading the names of the immigrant shopkeepers -- eight Turks and one Greek -- as well as the young German police officer.

These crimes are nothing less than an attack on our democracy, said Merkel, in her strongest comments on the crimes to date. We're determined to defend our open and tolerant way of life against horrid criminals and their despicable ideology.

Germans, long burdened by their Nazi past, have been mortified by news the three neo-Nazis had killed immigrants with impunity as police failed to realise right-wing extremists were behind the murders. Two of the neo-Nazis committed suicide after a botched bank robbery two weeks ago.

There has also been criticism that German institutions -- governments, judiciary and police agencies -- were blind to the right and overlooked signals that right-wing extremists might have been responsible for the murder spree. Critics say police might have been more energetic if 10 Germans had been executed.

But Merkel dismissed those allegations in her speech.

The fact that such a right-wing extremist cell existed and silently carried out such grisly deeds and was able to remain undiscovered underground for so long is without precedent, she added. I'm not the only one deeply disturbed by what the investigators are now uncovering about the perverse and revolting way of thinking by right-wing extremists.

The three neo-Nazis went underground after a bungled attempt to arrest them in 1998. Police suspect they may have had about a dozen helpers and many more sympathisers. Authorities admit they do not know how many neo-Nazis have gone underground.

Germany's Nazi past makes right-wing militancy a particularly sensitive subject. Experts have long warned of extremism among disenchanted young people in eastern regions of the country where unemployment is high and job prospects poor.

The existence of the cell only came to light by chance, raising fears the security services had underplayed the threat from the extreme right and may have been distracted by the use of unreliable informants. Police are reopening all unsolved cases with a possible racist motive since 1998.

(Editing by Noah Barkin)