Article 21 of the German constitution (Grundgesetz) states that political parties are very important for democracy. A party in Germany can only be banned if it can be proven that it violates the constitution. This can only be done in a lawsuit before the Federal Constitutional Court.
So banning parties is very difficult. It has been made so to prevent a party being arbitrarily outlawed. Because of its experiences with Nazism and the GDR, Germany is very careful when it comes to banning parties. In both of these dictatorships, free parties were banned and all power was held by a single party.
So far, two parties have been banned in the Federal Republic of Germany: the Socialistische Reichspartei (Socialist Reich Party or SRP), a successor to the National Socialist Party (NSDAP), in 1952, and the Communist Party of Germany (KPD) in 1956. In 2003, an application to ban the right-wing National Democratic Party of Germany (NPD) was turned down by the Constitutional Court on the grounds that procedural errors had been made.