Kurds make up an estimated 20 percent of Turkey's population of 75 million. The rebels took up arms in 1984 to fight for Kurdish independence, but later revised that goal to autonomy in southeastern Turkey. The group frequently launched attacks on Turkey from bases in northern Iraq.
Ocalan's message did not include a time frame for his fighters' retreat, suggesting that the Kurds may be expecting the government to take some confidence-building steps in the interim.
Justice Minister Sadullah Ergin, however, suggested earlier this week that the Kurdish withdrawal could be completed by the end of the year.
As part of the peace efforts, the government is expected to boost the rights of Kurds through reforms, including a more democratic new constitution that is likely to underscore equal rights for Kurds and could increase the power of local authorities. Kurds are also seeking the release of hundreds of Kurdish activists jailed for alleged links to the PKK as well as improved jail conditions for Ocalan, who is serving a life prison term.
Some Kurds believe Ocalan should be freed as part of the peace deal.
"A democratic solution and freedom for Ocalan," read one poster at the festival.
"As long as Ocalan is not free, peace would be a mistake," read another.
A key demand by the PKK is a guarantee that its estimated 4,000 fighters will not be attacked during any retreat. Erdogan has said he is open to the creation of an independent committee that could oversee the withdrawal of the rebels.
Turkish forces reportedly attacked PKK guerrillas as they retreated in 1999 while obeying orders from Ocalan who had appealed for peace soon after his capture that year, as well as during another unilateral decision to withdraw in 2004.
The peace efforts follow a surge in violence last summer that killed hundreds of people. It also comes as a Syrian Kurdish group linked to the PKK has gained control in several areas of war-torn northern Syria, adding to Turkey's worries. Many believe Turkey's conflict with the PKK is hampering its ambitions to become even more of a regional leader.
A deal with the PKK could also give Erdogan key support from Kurds for his goal to replace Turkey's political system with one that gives more power to a popularly elected president. Erdogan is widely believed to want to run for president next year.
Erdogan's government has carried out a series of reforms that have increased the Kurds' cultural rights, including broadcasts and classes in Kurdish. More recently it changed laws to allow Kurds to defend themselves in their own language in court.
"We have sacrificed decades for the (Kurdish) people. We have paid a huge price," Ocalan said in his speech. "None of it was in vain. The Kurds gained their self-identity."
In Washington, U.S. State Department Spokeswoman Victoria Nuland welcomed the announcement as a positive step toward ending the violence "which has claimed too many lives and too many futures."
German Foreign Minister Guido Westerwelle said the announcement must be "followed by concrete steps and the guns should fall silent."
The spring festival, or Newroz — which means "new year" — is mainly marked by Kurds in Turkey. It is also celebrated in Iran, where it is called Nowruz, and in some countries in Central Asia.
Kurdish demonstrators in the past have used the celebration to assert Kurdish demands and many events have resulted in violent clashes with Turkish security forces.
Suzan Fraser reported from Ankara, Turkey.
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