Chancellor Angela Merkel warned Germans on Monday not to be duped by far-right rhetoric, amid concern about the growing number of people flocking to anti-Islam demonstrations in the country.

A group calling itself Patriotic Europeans against the Islamization of the West, or PEGIDA, has staged weekly rallies in the eastern city of Dresden that have attracted growing numbers of supporters. Some 10,000 attended the protest last week and more are expected to attend again on Monday.

Although PEGIDA'S organizers insist that they are protesting only against extremism and not against immigrants or Islam itself, the demonstrations have received open support from neo-Nazi groups and far-right parties, prompting concerns that anti-foreigner sentiment might be on the rise again in Germany.

"There's freedom of assembly in Germany, but there's no place for incitement and lies about people who come to us from other countries," Merkel told reporters in Berlin.

"Everyone (who attends) needs to be careful that they're not taken advantage of by the people who organize such events," she added.

Opposition parties have accused Merkel's conservative Union bloc of being too timid in its criticism of the protests up to now, suggesting that she fears losing voters to the far right.

Immigration has emerged as a contentious topic again in Germany, partly due to the recent sharp rise in asylum applications, particularly from Syrians. More than 150,000 people sought refuge in Germany during the first 11 months of the year, an increase of 40,000 compared with 2013.

Last week fires broke out at three empty buildings earmarked to house asylum seekers, and anti-foreigner slogans and swastikas were painted at one site in Vorra, near Nuremberg. Police said they were treating the fires as arson.

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David Rising contributed to this report.