The leader of Germany's powerful Bavaria state said Sunday he would keep his deputy in the job despite a row over an old anti-Semitic leaflet, hoping to draw a line under the scandal ahead of a regional election.

Bavaria's conservative prime minister Markus Soeder said it would "not be proportionate" to sack Hubert Aiwanger -- a move that would have upended the ruling coalition in the southern state.

Aiwanger, leader of the populist Free Voters who are the junior coalition partner to Soeder's conservative CSU, has faced days of controversy over Nazi pamphlets found in his schoolbag as a teenager in the late 1980s.

Aiwanger, 52, has admitted being in possession of the leaflets but denies producing or distributing them. His brother has since claimed to be the author.

The document proposed a satirical quiz on "the biggest fatherland traitor" and offered as a prize "a free trip through the chimney in Auschwitz".

Aiwanger, who is also Bavaria's economy minister, on Thursday said he had made mistakes in his youth and apologised for any hurt caused, especially to victims of Nazi-era atrocities.

Although the leaflet was "disgusting" there was no evidence Aiwanger had written it, Soeder told reporters at a Munich press conference.

Aiwanger had also expressed regret for what happened 35 years ago, he added.

"It's not just what you say at 16 that matters, but also how you deal with it as a 52-year-old," Soeder said.

"And if you show true remorse, it's easier to hope for forgiveness."

But Soeder stopped short of giving Aiwanger a free pass, and criticised his deputy for not apologising sooner.

He also said Aiwanger's written responses to a list of 25 questions were "not all satisfactory".

The decision not to dismiss Aiwanger allows Soeder to keep his coalition government intact ahead of an October 8 regional election, for which postal voting has already begun.

Soeder is hoping for re-election and wants to continue governing with the right-wing Free Voters.

Latest opinion polls put support for Soeder's popular CSU at 39 percent, with the Free Voters at around 12 percent.

Soeder on Sunday again ruled out ditching the Free Voters and teaming up with the leftist Greens instead.

"There definitely won't be a black-green coalition in Bavaria," he said, referring to the party colours used by the CSU and the Greens.