Thousands were killed and the town was destroyed in the attack
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British diplomatic and church officials have attended a wreath-laying ceremony in Germany to mark the 60th anniversary of the bombing of Dresden.
A symbolic cross of nails was presented to the Bishop of Saxony in the city by the Dean of Coventry Cathedral.
But the milestone was upstaged by a march of around 5,000 neo-Nazis through the streets of the eastern city, which was devastated by the 1945 bombing.
A heavy riot police presence was in force amid fears of violence.
The angry scenes came on the anniversary of one of the most controversial attacks by Allied Forces during the Second World War.
On February 13, 1945, the British RAF Bomber Command launched a devastating raid on Dresden, destroying the city which was known as "The Balcony of Europe" for its stunning architecture.
The following day US bombers launched a second attack.
Planes killed around 35,000 people and ruined the heart of the city, as ground forces closed in on the Nazi regime.
Controversial episode
British and US ambassadors to Germany silently laid wreaths at a Dresden cemetery where some bombing victims are buried.
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It is about reconciliation and trying to rebuild the relationship
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The Very Reverend John Irvine, Dean of Coventry Cathedral, presented the cross of nails to the Bishop of Saxony at Dresden's cathedral, which was left in ruins by the bombers.
He said: "It's important to remember, not to gloat about it or dwell in it too much, but to remember the horror and to work for peace and reconciliation to make sure nothing like this happens again."
The Reverend Dr Oliver Schuegraf, from Wurzburg, Germany, but part of the cathedral's Ministry of Reconciliation, travelled to Dresden on Saturday with his English counterpart.
'Nazi terror'
Dr Schuegraf said Coventry, badly bombed by German forces in 1940, and Dresden had both suffered the devastating effects of the war.
Commenting on the far-right march - one of the biggest public gatherings of neo-Nazis since the war - he said: "In the long run, I hope, they are such a small minority they could not disturb the good relations between Germany and Britain."
German Chancellor Gerhard Schroeder, who was in Dresden, said: "Today we grieve for the victims of war and the Nazi reign of terror in Dresden, in Germany and in Europe.
"We will oppose in every way these attempts to reinterpret history. We will not allow cause and effect to be reversed."
Meanwhile, Bomber Command Association president Sir Michael Beetham said the organisation had not been invited to the commemorations and nor had veterans expected to go.
"The press made much of the Queen's visit to Germany recently, asking if she would apologise for Dresden," he said.
"But she did not apologise, she expressed regret - I expressed regret, all of Bomber Command expressed regret.
"We did not want to bomb Germany but how else do you win a war? World War II was a fight for survival."