North Korea said today it was cutting all ties with the South and threatened its wealthy neighbour with military action over alleged violations of its waters off the west coast.
The comments marked a new high in tensions on the divided peninsula after the March sinking of a South Korean warship, which Seoul blames on a torpedo fired by the communist North.
The increasingly war-like rhetoric hit Seoul's financial markets, prompting policymakers to call an emergency meeting on Wednesday to look for ways to calm investors.
"The Committee for the Peaceful Reunification of Korea...formally declares that from now on it will put into force the resolute measures to totally freeze the inter-Korean relations, totally abrogate the agreement on non-aggression between the north and the south and completely halt the inter-Korean cooperation," the North's KCNA news agency reported.
North Korea will also expel personnel from the Kaesong industrial park, a joint North-South venture just inside its border. It was not immediately clear what impact that would have on factories there.
The industrial estate, in which South Korean firms employ cheap North Korean labour, is an important source of revenue for the Pyongyang leadership.
North Korea earlier said if the South continued to cross into its side of the disputed sea border - the scene of deadly clashes in the past - the North would "put into force practical military measures to defend its waters."
The North referred to the South's government as "military gangsters, seized by fever for a war".
A report by international investigators last week accused the communist North, already under international pressure over its nuclear program, of torpedoing the Cheonan corvette in March, killing 46 sailors.
Yesterday, South Korean President Lee Myung-bak cut trade with his impoverished neighbour and blocked its commercial ships from sailing through the South's waters.
He also plans to take the issue to the UN Security Council. US secretary of state Hillary Clinton said in China today that Washington and Beijing would work together to come up with an "effective, appropriate" response to the sinking, which Washington condemned.
Mrs Clinton said both sides should examine the issue over time, suggesting quick Security Council action was unlikely.
"(China) shares with us the goal of a denuclearised Korean Peninsula and a period of careful consideration in order to determine the best way forward in dealing with North Korea."
In Washington, State Department spokesman PJ Crowley called Pyongyang's approach "odd." "I can't imagine a step that is less in the long term interest of the North Korean people than cutting off further ties with South Korea," he said.
Reuters