ANKARA (Reuters) — A cartoon in Turkey's Sabah newspaper showed a Kurdish guerrilla sneaking up behind Prime Minister Tayyip Erdogan and preparing to push him over a cliff into a raging fire representing Northern Iraq. "Please be careful," reads the caption; a reflection of Turkish fears that a major incursion into Northern Iraq to crush Kurdish rebels hiding there — subject of much speculation this week — would be a risky, ultimately counter-productive move.Turkey's government and army General Staff denied a Web site report on Wednesday that 50,000 troops had crossed the mountainous border to tackle Kurdistan Workers Party (PKK) rebels who use the region as a base to attack Turkish targets.

But the report sparked jitters in financial markets, exacerbated by later confirmation that troops had conducted a "limited" cross-border raid of the kind they are known sometimes to make and which Ankara says lies in the scope of self-defence.

Despite the increased army manoeuvres on the border, analysts say the odds are still against a major Turkish army incursion into Iraq as this would strain ties with the United States, its NATO ally, and the European Union, which Ankara aims to join.

It would also stoke more violence in Turkey's impoverished mainly Kurdish southeast region and could destabilise Kurdish Northern Iraq, an oasis of relative calm in that country.

"The Turkish military is aware that if they go in they can only inflict limited temporary damage on the PKK. The price they would have to pay would outweigh the benefits," said Gareth Jenkins, a writer on Turkish military and security issues.

"So I am not expecting them to cross unless they get a green or amber light from the United States, which looks unlikely."

But Turkey's frustration runs deep and even cautious analysts say the possibility of cross-border commando raids and aerial strikes against PKK positions has increased.

Ankara blames the PKK, which Washington and the EU also view as a terrorist group, for the deaths of more than 30,000 people since the group launched its armed campaign for an ethnic homeland in southeast Turkey in 1984.

This week, the PKK killed seven paramilitary policemen at their base in Tunceli province in the deadliest single attack in a year. Ankara has blamed the PKK for a May suicide bombing in the normally safe capital Ankara in which eight people died.

More attacks on that scale might tip the balance towards some kind of serious military action, especially given the political pressure on the ruling AK Party government to act tough as it prepares for parliamentary elections in July.

"Both the army and the government are trying to establish their nationalist credentials," said Jenkins.

Turkey's domestic political tensions complicate the picture.

Prime Minister Tayyip Erdogan was forced to call the July election months early after a bruising row with Turkey's secular elite, including the army generals, who suspect the government of trying to boost the role of Islam in the country.

"The military is in no mood to do any favours for the government (in Iraq)," said Wolfango Piccoli, a Turkey expert at the Eurasia Group, a political risk consultancy.

"Any incursion (into northern Iraq) risks boosting the AK Party's electoral appeal," he said.

With Washington's consent, Ankara has kept a contingent of up to 1,500 special forces in northern Iraq since Iraqi Kurdish groups clashed there in 1996. But their role is limited to monitoring events and gathering intelligence, analysts say.

In addition to its immediate priority of tackling the PKK, Turkey is also deeply concerned about moves by Iraq's own Kurds towards an independent state, possibly with the ethnically divided but oil-rich city of Kirkuk as its capital.

Piccoli said military action to thwart the formation of a Kurdish state was even more unlikely, given Kirkuk's location deep within Iraqi territory and the likely scale of both Kurdish and Arab resistance to Turkish invaders.

"But the Turks have economic leverage over Iraq's Kurds. Northern Iraq is dependent on Turkey for its food, cement, refined fuel. It gets 20 percent of its electricity from Turkey, 15 to 20 percent of its water," he said.

Iraqi Kurds view Turkish moves warily.

"If the Turkish... troops launch an attack against us, the Peshmerga (Kurdish fighters) will fight back and defend the Kurdish region," Jabar al-Yawir, deputy minister for Peshmerga Affairs in Kurdistan told Reuters. "(But) we're not expecting a land attack."

Some analysts were less sanguine about the chances for a non-military denouement in Northern Iraq.

"The Turks can't work out the endgame right now, how they would exit Iraq after a military operation. That, not US and EU strictures, is holding them back," said Rosemary Hollis, Middle East expert at British think-tank Chatham House.

"But sometimes, even if you can't see the endgame, an overriding argument can emerge for action and you have to act."