And he told Iraq it needed to do more than show "political will" to deal with the problem.

"We have already suffered thousands of casualties in this combat," he said, after talks with EU officials in Brussels.

"Turkey has a number of instruments so far for combatting terrorism and will continue to do that. These instruments include political dialogue, political instruments, diplomatic instruments and military instruments," he said.

"When it is time, and when it is necessary, we will use all the instruments to accomplish our combat against the PKK (Kurdistan Workers Party rebels) and we expect the international community to support us."

Earlier Tuesday, Iraq Foreign Minister Hoshyar Zebari said he believed the chances of a cross-border operation had diminished and he praised Turkey for showing restraint.

But Babacan said Iraq, already wracked by sectarian violence and a major insurgency, had to do more to deprive the rebels of their bases.

"Political will on its own is not enough. You also need physical capacity to be able to respond to the situation," he said.

The PKK, listed as a terrorist group by Ankara and much of the international community, has waged a bloody campaign for self-rule in mainly Kurdish southeast Turkey since 1984. The conflict has claimed more than 37,000 lives.

Faced with mounting PKK violence, the government last month obtained parliamentary authorisation to launch military attacks in neighbouring northern Iraq, where the PKK has rear bases.

An estimated 100,000 troops and equipment are massed on Iraq's border.

Earlier Zebari, also in Brussels, said he believed the chances of a cross-border operation had diminished and he praised Turkey for showing restraint.

"We believe the chances of a major invasion are less now," he said, before talks with EU foreign policy chief Javier Solana.

"Turkey has shown wisely a great deal of restraint in order not to destabilise the situation in Iraq, especially when things are moving positively," he said.

"I hope there wouldn't be any full scale incursion because that would be destabilising and have serious consequences on the entire region."