They are in fact self censoring. I live there and many people are just Nazis. It's illegal to be a Nazi, but the law works on facts you can prove in court, and the only way you can prove that is if they, for example, yelled Heil Hitler, or did the salute, or waved a swastika flag. As long as they're not too obvious about it, it's de facto allowed. Some people are still stupid enough to do the obvious signs of course.

No, it is not less democratic to suppress movements whose explicit goal is dictatorship and abuse of other people.