LONDON (Reuters) – Turkish debt fell here yesterday, reversing a large part of Tuesday’s rally, as the government said it would ask Parliament only to approve US military overflights to Iraq, short of what is needed to secure US aid. Ministers had been expected to send a motion to Parliament allowing Washington to station 62,000 troops in southern Turkey ahead of a likely war in Turkey’s neighbor Iraq. In return, the United States would have offered $30 billion in aid to buttress Turkey’s economy against the spillover from the war. Late on Tuesday, Turkey’s leaders said the motion would instead only cover military overflights. «With Turkey still not allowing US troops in, the package will be much narrower. There is not going to be enough to cover the shortfall,» said Amir Ben Gacem, emerging debt strategist at HSBC in London. Turkey’s economy has not yet fully recovered from the 9.4 percent contraction it experienced in 2001, and continues to labor under a mountain of domestic debt. A war in neighboring Iraq would hit Turkey’s tourism, a key dollar earner. Turkey’s 2030 dollar bond was at 94.875 percent of face value yesterday, down 4.5 points on the session. Late on Tuesday, US Secretary of State Colin Powell said allowing overflights for an attack on Iraq might lead to a new offer of financial support. But another senior State Department official said overflights alone would not justify compensation. The United States would like to station troops in southern Turkey to open up a second front against Iraq, which it wants to disarm of weapons of mass destruction, by force if necessary. Iraq has said it has no such weapons. Turkey’s segment of the industry benchmark, JP Morgan’s Emerging Market Bond Index plus, was quoted at 450 basis points over Treasuries, higher by 47 basis points over Treasuries, a substantial move. The Turkish Parliament narrowly rejected a motion on allowing US troops early in the month, and had said on Friday it would not bring it back until late in March. But at the weekend, US President George W. Bush signaled that March 17 would be a «moment of truth» for the United Nations, and on Monday he delivered a 48-hour deadline for Saddamn Hussein to leave Iraq. Turkey’s markets have been volatile as on Monday it appeared Turkey would face a war in Iraq without any economic assistance, crushing bond prices by 7 percent. Then, on Tuesday, it appeared a troop deal could be possible, and bonds rose 5 percent. «Now it looks obvious that Turkey is in trouble, and it is very difficult to see where this will lead,» said HSBC’s Ben Gacem.