South Korea and North Korea are holding their first high-level talks in nearly a year in a bid to defuse mounting tensions that have led to the brink of a military confrontation.

A factory complex that is North Korea’s last major economic link with the South was a virtual ghost town today after Pyongyang suspended its operations and recalled all 53,000 of its workers, cutting off jobs and a source of hard currency in its war of words and provocations against Seoul and Washington.

North Korea suspended its sole remaining major project with the South after weeks of threats against the United States and South Korea, as Russian president Vladimir Putin said any nuclear conflict could make Chernobyl look like a fairy tale.

TENS of thousands of mourners filled the lawn outside parliament for the state funeral yesterday of ex-president Kim Dae-jung, a longtime defender of democracy and advocate of reconciliation, who won the Nobel Peace Prize for his efforts to reach out to communist North Korea.

South Korea's President Lee Myung-bak will meet a delegation of visiting North Korean officials tomorrow, the latest sign that ties between the divided countries are warming.