(Adds details) By Hidir Goktas and Gareth Jones ANKARA, Oct 9 (Reuters) - Turkey's prime minister gave the green light on Tuesday for possible military action in northern Iraq to confront Kurdish rebels there, drawing a warning from the United States, which fears wider regional instability. The ruling AK Party said it would request, as soon as possible, parliament's authorisation for a major incursion into the mainly Kurdish region, Turkish private broadcasters CNN Turk and NTV reported. Washington urged Ankara to hold off on unilateral action, fearing it could destabilise Iraq's most peaceful area and potentially the wider region. Erdogan is under pressure from Turkey's powerful armed forces and the opposition to take action against rebels of the outlawed Kurdistan Workers Party (PKK) after they shot dead 13 soldiers on Sunday near the Iraqi border. Iraq's government said a recent security accord with Turkey was the best way for dealing with PKK attacks. Turkish Defence Minister Vecdi Gonul said parliament would need to authorise any large-scale military operation -- a scenario most analysts say remains unlikely -- but he said such permission was not required for limited, "hot pursuit" raids. "To put an end to the terrorist organisation operating in the neighbouring country (Iraq), the order has been given to take every kind of measure, legal, economic, political, including also a cross-border operation if necessary," Erdogan's office said in a statement. The U.S. State Department warned against such a move. "If they have a problem, they need to work together to resolve it and I am not sure that unilateral incursions are the way to go, the way to resolve the issue," said State Department spokesman Sean McCormack. Turkey, which has NATO's second biggest army, has recently carried out small "hot pursuit" raids into northern Iraq amid an escalation in attacks against Turkish civilians and soldiers. Turkey's army has also boosted troop levels in the southeast to fight the PKK inside Turkey and try to prevent rebels from infiltrating from northern Iraq. Several security buffer zones have been set up as well. Turkey has called on the U.S. and Iraqi authorities to clamp down on the some 3,000 PKK rebels still based in northern Iraq but says it has yet to see any concrete results. Financial markets are closely monitoring the incursion debate, although the Turkish lira and share prices did not move very much on Tuesday after Erdogan's statement. RISKS NATO Secretary-General Jaap de Hoop Scheffer condemned the latest PKK attacks and pledged the alliance's solidarity. But a major operation would strain ties with Washington and raise concern in the European Union, which Ankara aims to join. Diplomats fear such a move, given Turkey's strategic importance, could cause serious repercussions in an already tense Middle East and spark unrest in Turkey's mainly Kurdish southeast. Turkey's large-scale incursions in 1995 and 1997, involving an estimated 35,000 and 50,000 troops respectively, failed to dislodge PKK rebels from the Iraqi mountains. Turkey signed an anti-terrorism deal on Sept. 28 with Iraq targeting the PKK but failed to win Baghdad's consent to allow raids across the border. Their deal focuses on financial and intelligence measures against the PKK. "The security agreement... is the framework through which the security of the two countries can be preserved," Iraqi government spokesman Ali al-Dabbagh said. Ankara knows the Baghdad government has little clout in the autonomous Kurdish north, whose authorities are loathe to take action against their ethnic kin in the PKK. Turkey suspects the Iraqi Kurds want to build their own state, a move that could bolster separatism among its own large Kurdish population. Sunday's attack in Turkey's Sirnak province was the deadliest single incident in 12 years. Two other soldiers died on Monday in separate PKK landmine explosions. The previous week, 12 people, including village guards, died when PKK rebels ambushed their minibus in Sirnak province. Turkish television and newspapers have carried extensive pictures of the funerals, with coffins draped in the national flag and grieving wives, children and parents. Ankara blames the PKK for the deaths of more than 30,000 people since the group began its armed campaign for an ethnic homeland in southeast Turkey in 1984. (Additional reporting by Tabassum Zakaria in Washington, Mariam Karouny in Baghdad and David Brunnstrom in Brussels)
