THE German government has been drawn into a bizarre legal wrangle over a £2m Nazi treasure discovered in a North-East loft.

The authorities are searching for Herman Goering's relatives so they can make a claim for the Nazi chalice.

The treasure was discovered in a house in Sunderland where it had lain after being smuggled out of Germany by an enterprising squaddie at the end of the Second World War.

The chalice was at the centre of a blackmail plot involving a kidnapped dog last year, and has been kept in police custody ever since.

The chalice was given to its present owner as payment for a gambling debt.

But, when detectives found it had been smuggled out of Germany in the last few weeks of the Second World War, they confiscated the treasure.

Northumbria Police last night confirmed that the German Consulate had offered to help find the Nazi henchman's relatives.

The foot-high silver trophy is believed to have been made for the Luftwaffe chief to mark the German invasion of the Rhineland in 1936.

It bears the inscription: In memory of the great time. 7.3.36.

It was believed lost for more than 50 years, until it re-appeared when it became the focal point of a blackmail trial.

Derick Smith, 51, held his middle-aged victim's dog to ransom in a bid to force her to hand over the chalice, which is valued at £2m.

The chalice is being kept by police at an unspecified secure location as efforts are made to trace Goering's daughter, Edda, or any other surviving family members.

A police spokesman said: "We want to play this by the book and want to establish who is the correct owner.

"Goering's relatives may have a claim to the chalice."

Attempts have already been made to contact Edda, who was known to be alive in Munich in the mid-1990s and who may now be living in South Africa.

Smith, of Tuscan Road, Sunderland, admitted blackmail when he appeared at Newcastle Crown Court last year. He is due to be sentenced today.

The chalice is believed to have been smuggled out of Germany from Goering's country home at the end of the war.

Smith claims the chalice was passed to him and was among items the blackmail victim was looking after for him while he was in hospital.

The blackmail plot was uncovered after the woman alleged Smith had stolen her boxer dog which had gone missing. The animal was later returned unharmed.