The Greek government has hinted that it will seek to ban Golden Dawn after the far-right party was linked to the murder of a leading leftwing musician in Athens.

As violence erupted on the streets and demonstrators protested after the fatal stabbing of Pavlos Fyssas, a prominent anti-fascist, the public order minister, Nikos Dendias, cancelled a trip abroad saying the government would table emergency legislation that would seek to outlaw the group.

Amid renewed political tensions between the extreme left and right, the new law would re-evaluate what constituted a criminal gang, he said.

"Neither the state will tolerate, nor society accept, acts and practices that undermine the legal system," the minister told reporters, adding that the attack showed "in the clearest way the [party's] intentions".

Earlier in the day, police raided Golden Dawn offices across the country, with media reporting running street battles outside branches in Crete, Thessaloniki and Patras.

Voted into the Greek parliament for the first time last June, the neo-fascist Golden Dawn has been widely accused of employing violence to further its ratings in the polls.

The socialist Pasok party, the junior member of Antonis Samaras's two-party coalition, has campaigned openly for it to be banned, saying it should be considered a criminal gang.

The 34-year-old rapper died within minutes of being stabbed in the chest when he and a group of seven friends were set upon by around 30 black-clad supporters of Golden Dawn in the working-class district of Keratsini.

Eyewitnesses said the singer was stabbed several times by a man who suddenly appeared in a car after being phoned by members of the mob. The attack bore all the hallmarks of a premeditated assault, they said.

The alleged perpetrator, a 45-year-old man who was arrested when police rushed to the scene, later confessed to being a member of Golden Dawn. His wife, who was also detained, admitted having attempted to hide incriminating evidence, including party credentials linking her husband to the extremist organisation, when he called her, panic stricken, after the murder. Greek media cited police as saying the man was not only a sympathiser of Golden Dawn but visited its offices in Keratsini "five or six times" a week.

With parties across Greece's entire political spectrum condemning the killing, the far-right group vehemently denied it had any connection with the crime or the alleged culprit. In a rare intervention, the president, Karolos Papoulias, warned: "It is our duty not to allow any space whatsoever to fascism – not even an inch."

Fyssas, who performed under the stage name Killah P, would be the first Greek to have died at the hands of Golden Dawn, which until recently reserved its venom exclusively for migrants. Within hours of his death sending shockwaves through Greek society, the killing was being described as an "assassination."

Greece's third largest party and fastest growing political force, Golden Dawn currently controls 18 seats in the 300-member parliament. It appears to have been emboldened by its soaring popularity on the back of economic desperation.

In an atmosphere brittle with anger, uncertainty and fear, politically motivated violence has escalated, with the ultra-nationalists being blamed for attacks on communist activists last week and on a rightwing mayor in the south over the weekend.

Speculation is rife that the leadership of Golden Dawn may have lost control over a party whose grassroots supporters view themselves as soldiers in an armed struggle aimed at overthrowing a political establishment they blame for the country's woes.

"It is up to the government now to deal with Golden Dawn once and for all," said Giorgos Kyrtsos, a prominent political commentator. "We know very little about the inner workings of Golden Dawn, and whether its leadership has lost control [over its members]. But what we do know is that, for the first time, the government has them in a corner."