* Jewish leaders see echoes of Nazi-era policies
* Far-right leader apologises for remarks
* More than 1,000 people protest outside Parliament (Adds detail, reaction)
By Marton Dunai
BUDAPEST, Nov 27 (Reuters) - A call in the Hungarian parliament for Jews to be registered on lists as threats to national security sparked international condemnation of Nazi-style policies and a protest outside the legislature in Budapest on Tuesday.
The lawmaker, from the far-right Jobbik party, dismissed demands he resign, however, and said his remarks during a debate on Monday had been misunderstood - he was, Marton Gyongyosi said, referring only to Hungarians with Israeli passports.
Hundreds of demonstrators gathered outside parliament, many wearing the kind of yellow stars forced on Europe's Jews in the 1940s and some chanting "Nazis go home" at Jobbik members.
"I am a Holocaust survivor," local Jewish leader Gusztav Zoltai said by telephone. "For people like me, this generates raw fear." Though he dismissed the comments by Jobbik's foreign affairs spokesman as opportunistic politicking, the executive director of the Hungarian Jewish Congregations' Association, added: "This is the shame of Europe, the shame of the world."
The centre-right government of Prime Minister Viktor Orban issued a statement on Tuesday condemning the remarks by Gyongyosi, whose party surged into parliament two years ago on a campaign drawing on suspicion of Roma and Jewish minorities and attracting support from voters frustrated by economic crisis.
But in Jerusalem, the Simon Wiesenthal Center criticised the government for a tardy response, more than 16 hours after the event, and called the failure to penalise Gyongyosi as "a sad commentary on the current rise of anti-Semitism in Hungary".
About 500,000 to 600,000 Hungarian Jews were killed in the Holocaust, according to a memorial centre in Budapest. Some survivors reached Israel. Some 100,000 Jews now live in Hungary.
"TALLY UP JEWS"
Gyongyosi's intervention in parliament on Monday afternoon came after discussion of last week's fighting in the Gaza Strip and after a junior minister at the Foreign Ministry had made a statement to the house saying the government favoured a peaceful resolution of the Middle East conflict as it would benefit Jews and Palestinians in Hungary and Israelis of Hungarian descent.
The Jobbik member, one of 44 in the 386-seat parliament, said: "I know how many people with Hungarian ancestry live in Israel and how many Israeli Jews live in Hungary."
In his remarks, a video of which Jobbik posted on its party Web site, he went on: "I think such a conflict makes it timely to tally up people of Jewish ancestry who live here, especially in the Hungarian parliament and the Hungarian government, who, indeed, pose a national security risk to Hungary."
The deputy speaker chairing the debate was a Jobbik member and did not intervene. Socialist opposition lawmaker Pal Steiner, himself Jewish, said on Tuesday: "There was little reaction beyond sheer shock ... We couldn't really digest what we'd heard, we're so used to remarks like this from Jobbik."
Slomo Koves, chief rabbi of the Unified Hungarian Jewish Congregation, recalled references by Jobbik members to historic Christian bigotry against Jews and wrote: "Jobbik has moved from representing medieval superstition to openly Nazi ideologies."
Gyongyosi later indicated he was questioning the loyalty of Hungarians who held dual Israeli citizenship. In a posting on Jobbik's Web site, he said: "I apologise to my Jewish compatriots for my declarations that could be misunderstood."
At a news conference reported by national news agency MTI he said he would not resign and considered the matter "closed".
MEMORIES OF GENOCIDE
Parliamentary speaker Laszlo Kover, who is from Orban's Fidesz party, issued a statement calling for tighter rules to allow for such behaviour to be punished.
The Hungarian government spokesman's office said: "The government strictly rejects extremist, racist, anti-Semitic voices of any kind and does everything to suppress such voices."
Outside parliament on Tuesday, protester Andras Fodor, 28, said: "I thought we were done with this in our history ... If you say things like that, you don't belong in parliament."
There was no immediate comment from the European Union, which has raised concerns before about intolerance and minority rights in Hungary and about Orban's own commitment to democracy as critics accuse him of trying to entrench his party's power.
In Israel, which has voiced concern about the rise of anti-Semitic parties and attitudes across Europe, Foreign Ministry spokesman, Yigal Palmor, said his government urged Hungarians to act against such intolerance: "We call upon all the democratic forces in Hungary to do all they can in order to end the actions of anti-Semitic, xenophobic and racist elements."
Efraim Zuroff, the Israel director of the Wiesenthal Center, which works to bring Nazi criminals to justice, said Gyongyosi's statement was "sadly reminiscent of the genocidal Nazi regime which murdered hundreds of thousands of Hungarian Jews with the help of numerous local collaborators"
Calling Jobbik the heirs of wartime Hungarian fascists, he added: "Today's condemnation of the statement by the government is welcome but the total silence yesterday and the fact that the perpetrator of anti-Semitic incitement will apparently pay no price for his demagoguery will only encourage Jobbik to continue their campaigns of hatred against Hungarian Jews and Roma."
Opponents have condemned anti-Semitic and anti-Roma slurs by Jobbik as electioneering for a vote due in 2014 at which analysts say it could end up holding the balance of power.
Gyongyosi, 35, is a diplomat's son who grew up in the Middle East and Asia. A graduate of Trinity College Dublin, he worked in Ireland for the accountants KPMG before becoming active in Jobbik in 2006. He was elected to parliament in 2010. (Editing by Alastair Macdonald)