Berlin: Germany's domestic intelligence service has classified the anti-Muslim group Generation Identity as a right-wing extremist group, in the most significant step taken by a European state against the organisation.

After observing the group for three years, the BfV concluded on Thursday that it was extremist and trying to undermine Germany's democratic order.

The move will bring new powers for the BfV to monitor the organisation, including the ability to intercept phone communications.

Members of Generation Identity, a far-right youth group, at their headquarters in Halle in December 2018. Credit:Lena Mucha

But the agency emphasised that Generation Identity was not considered violent and steps would be "proportionate" to the risk.