* Merkel favours opening a new chapter
* Trade with Cyprus a key sticking point
* Turkey wants visa-free EU entry for citizens
German Chancellor Angela Merkel said on Monday she was in favour of reviving Turkey's stalled talks on its relationship with the European Union but a dispute over the divided island of Cyprus remained a stumbling block.
Speaking during a two-day visit to Turkey, Merkel, who favours a "privileged partnership" for Turkey in place of full EU membership, said it would be right to open a new chapter in Ankara's negotiations with Brussels.
But she said failure to agree on the Ankara Protocol, which would extend Turkey's customs agreement with the EU by opening its ports to goods from Cyprus, was hindering Turkey's membership ambitions.
"I said today that we should open a new chapter in the negotiations," Merkel told a news conference in Ankara.
"I must say however, that so long as the question of the Ankara protocol, which hangs closely together with Cyprus, is not solved, we will have problems in opening as many chapters as would be perhaps good and proper," she said.
Cyprus has been divided between the Greek Cypriot south and Turkish north since a Greek coup d'etat followed by a Turkish army invasion in 1974. Efforts to reunite the island have repeatedly failed and Turkey is the only nation to recognise the self-declared Turkish Republic of Northern Cyprus.
Turkey began EU entry talks in 2005, a year after Cyprus was admitted, but its bid for membership has been blocked by the intractable dispute, as well as by opposition from core members Germany and France.
"We can sign the Ankara Protocol only if the visa dialogue process with the EU is signed at the same time," Erdogan said at a joint press conference, underlining a long-standing demand that Turkish citizens be allowed visa-free travel in Europe.
LONG PATH AHEAD
Turkey has complained bitterly over Berlin's lack of support for its EU hopes, and has accused the EU of double standards in conducting negotiations without full membership in mind.
Formal EU accession negotiations with Turkey began in October 2005, just weeks after Conservative Merkel beat Social Democrat Chancellor Gerhard Schroeder in a federal election. Schroeder, who enjoyed close ties with Erdogan which he still maintains, had supported Turkey's entry.
As Germany, along with the EU, had already agreed to open negotiations, Merkel had to continue this position, although as Christian Democrat leader she personally opposed it and has always instead advocated a watered-down link with Ankara.
"We want a process with an open outcome. My position is known - I am sceptical towards full membership. But I fully support that the negotiations take place openly," Merkel said.
"We still have a long path ahead of us."
Turkey has completed only one of 35 policy "chapters" every accession candidate must conclude. All but 13 are blocked by France, Cyprus and the European Commission, which says Ankara does not meet standards on human rights and freedom of speech.
Socialist French President Francois Hollande said this month he was ready to unblock talks on the "chapter" or policy area dealing with help for EU regions. His conservative predecessor, Nicolas Sarkozy, strongly opposed Turkey's EU aspirations.
EU nations, which decide the speed of accession negotiations, reaffirmed their commitment to "active and credible" talks with Turkey at a meeting in Brussels on Dec. 11.
Asked about the issue in light of Merkel's visit to Turkey, the European Commission said on Monday it would continue to push for progress.
"Member states have called for a new momentum and we believe that this new momentum will be there for the accession negotiations this year," European Commission spokesman Peter Stano told reporters.