France sparked a major diplomatic row with Turkey on Thursday by taking steps to criminalise the denial of genocide, including the 1915 mass killing of Armenians by Ottoman Turks, prompting Ankara to cancel all economic, political and military meetings.

Turkish Prime Minister Tayyip Erdogan said the draft law put forward by members of President Nicolas Sarkozy's ruling party was politics based on racism, discrimination, xenophobia.

This is using Turkophobia and Islamophobia to gain votes, and it raises concerns regarding these issues not only in France but all Europe, he told a news conference, adding that Turkey could not remain silent in the face of this.

France had opened wounds with Turkey that would be difficult to mend, he said, adding that Sarkozy, who faces a tough re-election battle in April, was sacrificing good ties for the sake of political calculations.

Erdogan said Turkey was cancelling all economic, political and military meetings with its NATO partner and said it would cancel permission for French military planes to land, and warships to dock, in Turkey.

Earlier in the day, Turkish officials told Reuters their ambassador in Paris had been recalled for consultations.

Lawmakers in France's National Assembly -- the lower house of parliament -- voted overwhelmingly in favour of the bill, which will be debated next year in the Senate.

A French diplomatic source said Paris still considered fellow NATO member Turkey an important partner.

I don't understand why France wants to censor my freedom of expression, Yildiz Hamza, president of the Montargis association that represents 700 Turkish families in France, told Reuters outside the National Assembly.

Earlier, about 3,000 French nationals of Turkish origin demonstrated peacefully outside the parliament ahead of the vote, which came 32 years to the day since a Turkish diplomat was assassinated by Armenian militants in central Paris.

The authorities in Yerevan welcomed the vote. By adopting this bill (France) reconfirmed that crimes against humanity do not have a period of prescription and their denial must be absolutely condemned, Armenia's Foreign Minister Edward Nalbandian saying in a statement.

France passed a law recognising the killing of Armenians as genocide in 2001. The French lower house first passed a bill criminalising the denial of an Armenian genocide in 2006, but it was rejected by the Senate in May this year.

The latest draft law was made more general to outlaw the denial of any genocide, partly in the hope of appeasing Turkey.

It could still face a long passage into law, though its backers want to see it completed before parliament is suspended at the end of February ahead of elections in the second quarter.

National Assembly speaker Bernard Accoyer said on Wednesday that he doubted the bill would pass by the end of the current parliament, as the government had not made the bill priority legislation.

Armenia, backed by many historians and parliaments, says about 1.5 million Christian Armenians were killed in what is now eastern Turkey during World War One in a deliberate policy of genocide ordered by the Ottoman government.

Successive Turkish governments and the vast majority of Turks feel the charge of genocide is an insult to their nation. Ankara argues that there was heavy loss of life on both sides during fighting in the area.

TURKISH ANGER, FRENCH ELECTIONS

The French government has stressed that it did not initiate the bill, which mandates a 45,000-euro fine and a year in jail for offenders, and says Turkey cannot impose unilateral trade sanctions.

Faced with Sarkozy's open hostility to Turkey's stagnant bid to join the European Union, and buoyed by a fast-growing economy, Ankara has little to lose by picking a political fight with Paris.

With Turkey taking an increasingly influential role in the Arab world and Middle East, especially Syria, Iran and Libya, France could experience some diplomatic discomfort, and French firms could lose out on lucrative Turkish contracts.

France is Turkey's fifth biggest export market and the sixth biggest source of its imports.

Turkey is a democracy and has joined the World Trade Organisation so it can't just discriminate for political reasons against countries, Europe Minister Jean Leonetti told France Inter radio. I think these threats are just hot air and we (have) to begin a much more reasoned dialogue.

Ankara considers the bill, originally proposed by 40 deputies from Sarkozy's party, an attempt to win the votes of 500,000 ethnic Armenians in France in next year's elections.

It believes the measure would limit freedom of speech and represents an unnecessary meddling by politicians in a business best left to historians.

The French bill feeds a sense shared by many Turks that they are unwanted by Europe and it fires up nationalist fervour. However, in a more self-confident Turkey, popular reaction has been more muted than in the past.

France has been pushing Turkey to own up to its history, just as France belatedly recognised the role of its collaborationist Vichy government during World War II in deporting Jews to Nazi concentration camps.

(Additional reporting by Pauline Mevel and Emile Picy in Paris, Tulay Karadeniz in Ankara and Hasmik Mkrtchyan in Yerevan; Editing by Andrew Heavens)