THE Mediterranean cruise industry is already suffering from the effects of the Iraq crisis and the sharp drop in the number of North Americans planning on going abroad this year. Princess Cruises said this week weak bookings for European cruises had prompted it to cancel 2003 Mediterranean voyages by the leading line's Grand Princess, which will instead this summer sail the Caribbean. “While consumer demand is adequate for one ship in the Mediterranean, we see stronger demand for closer-to-home cruises,” Executive Vice President Dean Brown said. The chief executive of P&O Princess Cruises Plc, the British owner of the line which is merging with No. 1 cruise operator Carnival Corp of Miami, last week said there had been a significant drop in the number of Americans wanting to travel in Europe. Bookings for cruises in Europe, which had been a promising region for the big lines seeking to expand beyond their North American strongholds, were hurt badly by the Sept. 11 attacks. But industry hopes of renewed European business this year has been hurt anew by fears of war in Iraq and heightened worries about terrorist attacks. Many Americans are showing a strong predilection for domestic trips, according to travel agents.