KOREA:At the end of a three-day summit in Pyongyang in North Korea, leaders of the two Koreas agreed to discuss a formal peace treaty to end the Korean War, shortly after the North signed up to a deal to disable its nuclear facilities.
"North and South Korea shared the view they must end the current armistice and build a permanent peace regime," President Roh Moo-hyun and North Korean leader Kim Jong-il said in an eight-point joint declaration.
The reaction in South Korea was upbeat. News programmes ran pictures of a smiling Mr Roh after the talks, as well as an equally cheerful Mr Kim clinking glasses of his favourite tipple, vintage Bordeaux, with his southern visitors to celebrate the agreement. On paper it represents the most significant progress in bilateral relations on the peninsula in more than 50 years, although analysts remained cautious on the prospects.
Expectations were low in the run-up to the talks, which began amid accusations from the South Korean opposition that Mr Roh went to Pyongyang as an election stunt, as he is trailing in the polls ahead of February elections.
Mr Roh received a lukewarm reception from Mr Kim on his arrival in Pyongyang, and there were fears the notoriously volatile leader was not open to negotiation.
By the end of the summit, however, the body language between them was altogether warmer and more positive, with Mr Kim appearing much more relaxed than he had previously.
The leaders said they would sit down with the US and China next month in an attempt to construct an official treaty to conclude the 1950-1953 Korean War, in which millions died.
An end to the fragile armistice between the two would do much to ease regional tensions in Asia and would also provide a foundation for North Korea to end its status as an international pariah.
They also agreed to expand bilateral Korean co-operation in politics and committed to developing economic ties between the wealthy South and the almost bankrupt North.
Under the agreement, they will establish the first regular freight train service for half a century, linking two countries divided by the heavily fortified demilitarised zone, which is guarded by over one million troops.
For most South Koreans, the big fear is less the resumption of hostilities with their Stalinist neighbours than collapse of the North Korean economy.
While South Korea is a powerful industrial nation - the fourth biggest economy in Asia and the 13th biggest in the world - North Korea's economy has teetered on the edge of bankruptcy since the former Soviet Union signalled an end to subsidies from Moscow.
It's almost exactly one year since North Korea tested a nuclear device, angering the international community and leading to punitive sanctions that have hit the already faltering economy hard.
The summit ended just a day after the secretive North agreed to disable the three main nuclear facilities at its Yongbyon site - and a source of material for atomic weapons - and provide a full declaration of all its nuclear programmes by the end of the year. President George Bush, who is also keen for benign news in the foreign policy arena, hailed the nuclear deal with North Korea, which he branded a point on his "axis of evil" along with Iraq and Iran.
He said the North Korean solution could provide a template for ending Iran's nuclear ambitions.
While the nuclear deal has been broadly welcomed, many Korea-watchers say they are adopting a "wait and see" attitude.
North Korea has failed to deliver on its promises before on many occasions and its nuclear capabilities remain its only bargaining tool.
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