A video clip published last week that showed an effigy of Erdogan hanging upside down outside Stockholm's city hall caused outrage in Turkey. Ankara summoned Sweden's ambassador on Thursday and demanded that those responsible for the demonstration be prosecuted.

However, a Swedish prosecutor formally decided the action was not punishable by Swedish law.

"I received the case as defamation, but did not think it could amount to defamation. Therefore, I decided not to initiate a preliminary investigation," prosecutor Lucas Eriksson told Aftonbladet on Monday.

Sweden has been seeking Turkey's approval to join NATO, forwhich it applied after Russia's invasion of Ukraine last year.Ankara has said Sweden needs to take a clearer stance againstwhat it sees as terrorists, mainly Kurdish militants and theorganisation it blames for a 2016 coup attempt.

Finland and Sweden signed a three-way agreement with Turkeyin 2022 aimed at overcoming Ankara's objections to their NATOmembership.

Sweden's prime minister condemned the demonstration last week and said it was a sabotage of Sweden's bid to join NATO.

(Reporting by Johan Ahlander; Editing by Nick Macfie)