What this baker did is discriminate. Won't hear any argument from me there. He could not do that but he did do that.

 I used German as an example only because that was a post I had read here.  That's all.  But it is a good one to use. I would not be happy about making a cake with a swastica on it however, I am making the assumption based on the laws I read that a cake maker would have to make such a cake with a swastica (ancient religious icon) if they make cakes with a Star of David or any other style shield on them.

They simply cannot refuse to produce an image (that is not illegal of course!) based on ethnic origins if they make other cakes with ethnic images that the baker approves of. So the image may be offensive to one person, but  may be a "National Glorified" image of a person or place  to another, who grew up in a different location.