The flea market, which was held Saturday, offered posters of former Spanish dictator Francisco Franco, Nazi swastikas and SS skull emblems.
Mayor Meredes Garcia gave the organizers permission to hold the event at a state-funded school, The Local.es reported.
Garcia said she did not see swastikas or any Nazi paraphernalia when she visited the marked.
"There was never any intention to hurt anybody's feelings," she said.
But local lawmakers, like Azucena Concejo, said they were shocked by event and are condemning it.
"Nazi emblems are banned in Germany and constitute a crime," she said.
The event in Quijorna, a small municipality in the outskirts of Madrid, was part of a military display to honor those who lost their lives in the area during the Spanish Civil War.
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