Ms Shah had been accused of anti-Semitism after it emerged that she endorsed a plan to relocate Israel to North America, but Mr Livingstone said there was an “orchestrated campaign” by supporters of Israel to smear critics of that country as anti-Semitic.
The former Mayor of London also said he had “never” heard anyone say anything anti-Semitic in the Labour party.
In one particularly firey exchange caught on camera Labour MP John Mann shouted at Mr Livingstone and accused him of being a “Nazi apologist rewriting history”.
“There’s been a very well-orchestrated campaign by the Israel lobby to smear anybody who criticises Israeli policy as anti-Semitic. I had to put up with 35 years of this,” Mr Livingstone told BBC London.
“Her remarks were over the top but she’s not anti-Semitic. I’ve been in the Labour party for 47 years; I’ve never heard anyone say anything anti-Semitic.
“I’ve heard a lot of criticism of the state of Israel and its abuse of Palestinians but I’ve never heard anyone say anything anti-Semitic.”
Ms Shah has said she now believes her comments were anti-Semitic and also apologised for causing offence. She has been suspended.
Pouring more fuel onto the fire of the row, Mr Livingstone told BBC London that Adolf Hitler himself was a supporter of Zionism.
“Let’s remember when Hitler won his election in 1932, his policy then was that Jews should be moved to Israel. He was supporting Zionism – this before he went mad and ended up killing six million Jews,” he said.
Labour’s Mayor of London candidate Sadiq Khan said in a tweet after the interview aired that Mr Livingstone’s comments were “appalling and inexcusable”.
“There must be no place for this in our party,” he added.
Many other MPs, including Luciana Berger, Phil Wilson, and Gavin Shuker, have now also called for Mr Livingstone to be suspended over the remarks.
Labour MP Jess Phillips tweeted: “Ken Livingstone must be suspended from the Labour Party”.
The Haavara Agreement, signed by Nazi Germany in 1933 did, arrange for the voluntary emigration of German Jews to the Middle East, but temporarily effectively stripped many émigrés of their property.
At the same time Nazi authorities persecuted Jews in Germany through other legal and violent means, adding an element of coercion to the policy.
Nazi policy later evolved to the mass murder of Jews both home and abroad as part of the Holocaust.
Last night Lord Levy, a former fundraiser for Tony Blair, told the BBC’s Newsnight programme that Labour had a “serious” problem with anti-Semitism.
Labour yesterday said it would draw up new guidlines on what constitutes anti-Semitism to aid in the expulsion of members suspected of it. Jeremy Corbyn and John McDonnell have both said anti-Jewish racism should not be tolerated in the party.
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