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

"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 rebel Kurdistan Workers' Party (PKK) which has bases in northern Iraq.

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. The issue is of terrorism," the Turkish minister said.

The Iraqi foreign minister pledged that Baghdad would assist Ankara in its struggle against the PKK which has waged a deadly insurgency for Kurdish self-rule in southeastern Turkey since 1984.

"The Iraqi government will actively help Turkey to overcome this menace," said Zebari, who is himself a Kurd.

Babacan's talks in Baghdad came as Turkish Prime Minister Recep Tayyip Erdogan raised the possibility of joint action with the United States against rear-bases of the PKK which has stepped up its insurgency in recent weeks.

Turkish members of parliament have authorised the government to take military action in northern Iraq to flush out the rebels if it deems it necessary.

Turkish anger over the presence of PKK rebels in northern Iraq intensified after a weekend attack by the rebels on a military patrol near the border that left 12 soldiers dead.

But the government has so far accepted US calls to hold back from unilateral action.

Erdogan, who was in London for talks with his British counterpart Gordon Brown on Tuesday, said he had discussed with US Secretary of State Condoleezza Rice the possibility of joint action against the rebels.

"We may conduct a joint operation with the United States against the PKK in northern Iraq," Erodgan told the mass-selling Turkish daily Hurriyet on his flight into London.

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 president reaffirmed our commitment to work with Turkey and Iraq to combat PKK terrorists operating out of northern Iraq," White House national security council spokesman Gordon Johndroe said.

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.

"Now the Turks are at the end of their rope, and our risk calculus is changing," the official told the Tribune.

The United States, which uses the Incirlik air base in southern Turkey as a major staging post for supplies headed to its forces in Iraq and Afghanistan, fears any unilateral action by Turkey could wreck efforts to stabilise Iraq.

In a video-conference with Maliki, Bush pressed for more action against the PKK from both the authorities in Baghdad and the autonomous Kurdish regional government in northern Iraq.

"The prime minister agreed with President Bush that Turkey should have no doubt about our mutual commitment to end all terrorist activity from Iraqi soil," Johndroe said.