"The PKK is a bad terrorist organisation and we have taken a decision to close its offices and not allow them to work on Iraqi soil," Maliki said in a statement issued after talks with visiting Turkish Foreign Minister Ali Babacan.

"We are putting all our efforts to eliminate their terrorist activities that threaten Iraq and Turkey," said Maliki, who has been under increasing pressure from Ankara and Washington to act against the Iraq-based Kurdish rebel threat to Turkey.

Foreign Minister Hoshyar Zebari, who is a Kurd, said earlier that Iraq had begun undertaking a series of measures to thwart the rebels, "including restricting their movements, (their) funding and closing of their offices".

Babakan used his high-profile visit to reassure Iraq that Turkey wants a diplomatic solution to the problem of Kurdish rebel bases but rejected a conditional ceasefire offer made by the guerrillas.

"Politics, dialogue, diplomacy, culture and economy are the measures to deal with this crisis," the Turkish minister told a joint news conference in Baghdad with his Iraqi counterpart .

"We do not want to sacrifice our cultural and economic relations with Iraq for the sake of a terror organisation," he said, referring to the PKK which has used bases in northern Iraq to wage a deadly insurgency for Kurdish self-rule in southeastern Turkey since 1984.

But Babacan rejected a truce offer made by the PKK on Monday in return for an end to Turkish military action.

"The issue of ceasefire is an issue between two countries and two armies and not with a terror organisation," he said.

Babacan said diplomacy remained the best way to resolve the crisis despite the "huge anger" in Turkey over the deaths of 12 soldiers in a weekend attack by the rebels on a patrol near the border.

Tens of thousands of Turks protested across Turkey on Tuesday during the funerals of the slain soldiers.

"We are all soldiers, we will smash the PKK," mourners chanted at one such funeral, while a placard at another funeral read "Treacherous Talabani... give us the dogs," referring to Iraqi President Jalal Talabani.

Talabani -- also a Kurd -- has said that Baghdad is unable to capture and hand over PKK rebels based in northern Iraq as requested by Ankara.

In London, Turkish Prime Minister Recep Tayyip Erdogan said Ankara had not ruled out military action, sanctioned by parliament last week.

"The Iraqi government must know that we can exercise this mandate we have received from the Turkish parliament at any time," Erdogan said after talks with his British counterpart Gordon Brown.

Erdogan said any incursion into northern Iraq would be aimed solely at flushing out PKK rebels, who have stepped up their insurgency in recent weeks.

Brown said he understood the anger and frustration in Turkey over the presence of Kurdish rebels in northern Iraq.

"I can assure you we are doing everything in our power... to make sure that there is no safe haven for terrorist organisations in that part of Iraq threatening Turkey," he said.

Ahead of his talks in London, Erdogan had raised the possibility of joint action with the United States against PKK bases inside Iraq.

As he flew into London, he told the mass-selling Turkish daily Hurriyet that he had discussed with US Secretary of State Condoleezza Rice the possibility of joint action against the rebels.

Erdogan said he received the signal that Washington might become involved during a telephone conversation with Rice on Sunday.

"She was worried. I saw she was in favour of a joint operation," he said. "She asked for a few days' time and said she would come back to us."

In a telephone conversation with his Turkish counterpart Abdullah Gul on Monday, President George W. Bush promised US cooperation in Turkey's struggle against Kurdish rebels.

The Chicago Tribune reported that the US military was considering air strikes on the rebels.

Citing an official familiar with Bush's conversation with Gul, the newspaper said cruise missile launches against PKK targets have been discussed, but air strikes using manned aircraft were an easier option.

"In the past, there has been reluctance to engage in direct US military action against the PKK," the official told the Tribune.

"But the red line was always, if the Turks were going to come over the border, it could be so destabilising that it might be less risky for us to do something ourselves."

The United States, which uses the Incirlik air base in southern Turkey to supply its forces in Iraq and Afghanistan, fears any unilateral military action by Turkey could wreck efforts to stabilise Iraq.