Massimo D'Alema and Jacques Santer met in Brussels

After meeting Italian Prime Minister Massimo D'Alema in Brussels, Mr Santer said Turkey would be in breach of agreements with the EU if there were an official boycott.

Mr Santer said the EU would seek urgent consultations with Turkey if it introduced sanctions on Italy.

"If those consultations don't work, the EU could legitimately impose retaliation," he said.

The BBC's Peter Biles reports from Brussels: The diplomatic temperature is rising

The Turkish Government said there was no official boycott of Italian products.

But a government spokesman, Sukru Sina Gurel, added: "We have no responsibility for the Turkish private sector's reaction towards Italian products."

Abdullah Ocalan: Turkey's most wanted

The row developed after Italy refused to extradite Kurdish separatist leader Abdullah Ocalan to Turkey. Italy's constitution bans extradition to countries where the death penalty still exists.

Mr Ocalan, at the top of the Turkish authorities' most wanted list, is accused of being responsible for the deaths of 30,000 people in the Kurdish struggle for an independent homeland.

Turkey's relations with the EU have been strained since last December when the EU leaders pushed Turkey to the back of a line of 12 nations seeking to join the EU.

Defence contracts in danger

The Turkish defence minister has said no future tenders for Turkish defence contracts would be accepted from Italian firms.

Reports say that some Italian television networks have been excluded from Turkish cables.

Hundreds of companies have announced boycotts of Italian goods amid widespread outrage in Turkey over Italy's refusal to hand over Mr Ocalan.

A customs union signed in 1995 and other agreements call for free trade in most goods between Turkey and the EU. However, neither television nor defence contracts are covered.

US tries to calm row

The United States has said it is working with fellow Nato members - Turkey, Italy and Germany - to defuse the row.

James Rubin: Reviewing full range of options

State Department spokesman, James Rubin, said emotion was running high on all sides and the department was working to bring Mr Ocalan to justice.