N Korea eases South border rules

North Korea has agreed to reopen its border with South Korea and allow tourism and family reunions to resume, the North's KCNA news agency said.

But at the same time KCNA reported that the entire country had been ordered on to special alert over joint US-South Korea military exercises.

The border easing followed talks between the North's leader Kim Jong-il and the head of the Hyundai group.

Hyundai chairwoman Hyun Jeong-eun also won the release of a detained worker.

The man had been held since March for allegedly criticising Pyongyang's regime.

North Korea also recently pardoned two jailed US journalists.

'Prompt annihilating strike'

Hyundai heads up tourism to the North and operates a joint factory just south of the border that is a key source of revenue for the impoverished regime.

There was no word on whether Hyundai had agreed to the North's demands for large wage increases for workers at the Kaesong industrial park.

But the KCNA statement said South Korean tourists and business people would soon be allowed to cross freely.

It also said it would allow more reunions of Korean families - separated since the 1950-1953 war - starting around Korean Thanksgiving Day, which falls on 3 October.

The meeting between Kim Jong-il and the Hyundai officials came a week after Pyongyang released the two US journalists following an unexpected visit by former US President Bill Clinton.

However, in keeping with its usual response to South Korea's military exercises, the North vowed to retaliate for any breach of its sovereignty with a nuclear attack.

It threatened a "merciless and prompt annihilating strike at the aggressors", saying the drills south of the border were a "grave threat" to peace and a prelude to an invasion.