By ALESSANDRA RIZZO Associated Press Writer

ROME (AP) -- A Rome court freed a Kurdish rebel leader from detention today, ordering

him to remain in the capital while his appeal for political asylum is considered.

Abdullah Ocalan has been held in a military hospital since he was arrested last week upon

after arriving on a flight from Moscow.

Turkey has demanded the extradition of Ocalan, whose guerrillas have fought a 14-year war

for a Kurdish homeland in southeastern Turkey. Nearly 37,000 people have been killed in

the conflict.

``I am amazed,'' Turkey's ambassador to Italy, Inal Batu, told the AGI news agency. ``The

head of a terrorist organization, a notorious assassin is treated by your country like a

welcome guest.''

Italy's law prohibits it from extraditing someone to a country where he may face the death

penalty, as is the case with Ocalan in Turkey.

Italian Premier Massimo D'Alema said he would not be intimidated and would apply the

court's decision, which came after Germany's announcement Wednesday that it would not

seek Ocalan's extradition. Ocalan has been wanted in Germany on charges of terrorism since

1990.

Because of Germany's decision, Italy no longer felt it necessary to adhere to the

German-issued arrest warrant for Ocalan, the court said in its decision. And as Italy could

not extradite Ocalan because of the death penalty threat in Turkey, the court said there was

no legal basis to keep him under arrest.

In a written statement, Ocalan appealed to the thousands of Kurds who have traveled to

Rome in a show of solidarity to return home and sustain the Kurdish cause through legal and

democratic means.

``I don't want our people to keep protesting and setting themselves on fire and I don't want

any behavior which might reflect badly on the Kurdish people,'' said the statement, read by a

Kurdish spokesman in Rome, Akif Hasan.

Turkey has been furious over Italy's refusal to turn over Ocalan, and Turkish businesses are

boycotting Italian goods in response.

Foreign Minister Lamberto Dini denounced the boycott, calling the action ``an aggression

against all of Europe.''

Ocalan will be free to move around Rome but will have to notify authorities of any plans to

leave his residence.

AP-NY-11-20-98 0948EST