German prosecutors Tuesday said they were investigating after Islamophobic PEGIDA protesters at an anti-refugee rally displayed a miniature gallows with the names of Chancellor Angela Merkel and her deputy.

The probe against persons unknown was on suspicion of public incitement to commit criminal acts and disturbing the peace, charges which carry up to five years jail, said prosecutors in the eastern city of Dresden.

Lawmakers voiced outrage over the macabre stunt at Monday night's rally that drew thousands of supporters of the PEGIDA movement, short for "Patriotic Europeans Against the Islamisation of the Occident".

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