ATHENS (AFP) - Greek Prime Minister Costas Simitis and Turkish Foreign Minister Abdullah Gul met Wednesday in a bid to iron out differences ahead of Turkey's bid to open membership talks with the European Union, sources close to the talks said.

"Simitis told Gul that 2004 will be an important year for Turkey and that Ankara needed to take steps to resolve differences now -- not at the last minute," a Greek source who attended the 45-minute-long talks said.

The divided island of Cyprus and alleged violations of Greek airspace by Turkish fighter planes were among the topics discussed.

Greece insists that Turkey must resolve all bilateral disputes before it can open membership talks with the EU, which is set to evaluate Ankara's progress at the end of next year. According to a Turkish source close to the talks Gul said "he fully understood the Greek position."

"The European Union is a good framework to resolve differences," the source quoted Gul as saying, suggesting Ankara wanted progress on accession talks to precede the resolution of differences.

NATO allies Greece and Turkey are at loggerheads over the divided island of Cyprus as well as over air control and territorial rights in the Aegean, the sea that separates them.

On Tuesday, Gul and his Greek counterpart George Papandreou said they went one step further towards improving strained relations through new deals to abolish double taxation, boost tourism flows between them and step up security cooperation ahead of the Athens 2004 Olympics.

After his meeting with Simitis Gul departed for Bosnia to attend the funeral of its former leader Alija Izetbegovic.