Ocalan, leader of the separatist Kurdistan Workers' Party (PKK), said his militants and Ankara should consider a mutual ceasefire, the Firat news agency, which is close to the rebels, reported.

"A mutual process of non-violence could be developed. If such a will emerges, (the rebels) could also follow suit," Firat quoted Ocalan as saying at a meeting with his lawyers.

"There are expectations to end the clashes. Our people, the Kurds, also have such expectations," he said.

Ocalan, sentenced for life in 1999, retains influence over the PKK and often communicates statements through his lawyers when they visit him on the prison island of Imrali.

The PKK has dramatically stepped up violence since Ocalan said in May he was abandoning efforts to seek dialogue with Ankara to end the 26-year insurgency in the Kurdish-majority southeast.

Earlier Friday, the army said Turkish jets bombed overnight PKK targets in neighbouring northern Iraq, where the group enjoys safe haven, following deadly clashes inside Turkey.

"The targets were hit successfully," the statement said, without any mention of rebel casualties.

The jets targeted PKK hideouts in the Qandil mountains and the Khakurk region, it said, adding that "necessary caution was displayed" not to harm civilians.

A PKK spokesman in northern Iraq said a village house was destroyed in the raid, which lasted an hour and a half, but there were no casualties.

The raid followed clashes inside Turkey on Thursday in which 12 militants and five members of the security forces were killed.

The fighting erupted after PKK rebels attacked a military unit in a rural area in Siirt province.

In their bloodiest attack in two years, the PKK killed 12 soldiers last month in an attack on a border unit at the Iraqi frontier.

Also last month, five soldiers and a teenager were killed when a roadside bomb, claimed by the rebels, hit a bus carrying army personnel in Istanbul.

The mounting violence dealt a severe blow to an already fragile government initiative to boost Kurdish freedoms and investment in the impoverished southeast in a bid to erode separatist sentiment among the Kurds and cajole the PKK into laying down arms.

Ankara however rejects dialogue with the PKK, insisting the rebels should either surrender or face the army.

"My preference is not for the escalation of clashes and internal strife. A solution may be found on a democratic ground, primarily through a democratic constitution," Ocalan said, according to Firat.

He appeared to refer to Kurdish demands for a new constitution that would recognise the sizeable Kurdish community as a distinct element of Turkey's population and grant it autonomy.

Ocalan also urged "practical steps" to boost confidence between Ankara and the Kurds before the requested constitutional overhaul.

The measures should involve the release of dozens of activisits arrested for links to the PKK and reforms that would make it easier for Kurds to enter parliament and scrap an anti-terror law used mostly against the PKK, he said.

"What if a solution is not sought on a democratic ground? The process of conflict will escalate... But this is not something we prefer," he said.

The PKK, listed as a terrorist group by Ankara and much of the international community, took up arms in 1984, sparking a conflict that has claimed some 45,000 lives.