After months of lying low, Greece's neofascist Golden Dawn party has returned to the streets, vowing to contest local and European elections under a new name to circumvent a possible ban.

The Greek far-right party, Europe's most violent political force, announced members would form a new outfit called National Dawn if it is prevented from participating in the poll because of an ongoing inquiry into alleged criminal activities.

"Patriots will have a party to vote for in the next election if [authorities] go ahead with the coup to ban Golden Dawn," Ilias Kasidiaris, an MP and leading light of the party, told thousands of black-clad supporters gathered in central Athens.

"Whatever happens, we will contest the elections. Greek nationalists who have not been involved in criminal organisations, who have no criminal record, have founded a new patriotic party, the National Dawn."

After debt-stricken Greece's shaky two-party coalition announced that the European poll would coincide with municipal elections in May, the vote is seen as a barometer of the mood at large.

On Saturday, Alexis Tsipras, the leader of main opposition party, Syriza, said the double election would amount to a referendum over the deeply unpopular austerity programme exacted in exchange for emergency loans from the EU and IMF.

As the head of Europe's biggest leftist force, Tsipras is also running for the post of European commission president. But it is the virulently anti-immigrant Golden Dawn that the 28-nation bloc is watching most keenly.

Kasidiaris – who has emerged as the public face of a party that has seen six of its 18 deputies jailed since the murder in September of an anti-fascist musician – revealed the extremists' plans at a rally marking the 18th anniversary of a military standoff between Greece and Turkey over two uninhabited isles in the Aegean sea.

Since being catapulted into parliament in June 2012, the ultranationalists have rowdily commemorated the event – the nearest the two neighbouring countries have come to blows since the 1974 invasion of Cyprus.

Last year, the party claimed more than 50,000 attended the rally. This year fewer than 3,000 showed up despite the event being turned into an outpouring of grief and solidarity for two members shot dead in December and the party's incarcerated MPs, including leader Nikos Michaloliakos.

An unrepentant admirer of the military junta in power until 1974, Michaloliakos, who founded Golden Dawn in the early 1980s, stands accused of running a paramilitary operation that systematically attacked migrants, leftists and gay people.

Despite the organisation's apparent inability to mobilise supporters it is still riding high in polls. Surveys show Golden Dawn remains the country's third largest force, able to win at least 10% of the vote on a wave of anti-austerity anger and disgust with the political establishment.

Kasidiaris, who has announced his candidacy for mayor of Athens despite also facing criminal charges, is projected to get as much as 15% of the vote. "They put us in jail. And what happened? Did we falter?" he asked those gathered on Saturday.

"No we did not. We are stronger, we are more powerful and in a short time we will be in power."