Economy dogs N.Korea's brilliant Kim on birthday

Kim, in questionable health as he turned 68 and trying to pave the way for succession in Asia's only communist dynasty, was facing one of the most difficult periods of his rule due to economic measures that sparked a rare public backlash.

He has come under pressure to return to disarmament-for-aid nuclear talks due to U.N. sanctions imposed after a May 2009 nuclear test and a botched currency move that nearly halted commerce late last year and worsened the state's economic woes.

At home, Kim was hailed as the peerlessly brilliant commander of the present era, the North's nominal head of state said in a national celebration of his birthday.

The number two leader Kim Yong-nam also underscored the need to put an end to the hostile relations between (North Korea) and the U.S. through dialogue and negotiations, the North's official KCNA news agency said.

Kim Jong-il's nearly 16-year rule has survived a famine that killed an estimated 1 million of the North's 22 million people and isolation caused by its nuclear brinkmanship, but a currency revaluation implemented late last year has shown cracks in his leadership.

It sped up inflation, made it tougher for an impoverished people to buy the necessities that keep them alive, and according to the South's spy agency, sparked civil unrest in one of the world's most entrenched authoritarian states.

The public has linked the new hardships inflicted upon to the central government. This does not mean the government is about to collapse but conflict between the public and government will greatly increase, said Park Hyeong-jung, an expert on the North at the South's Korea Institute for National Unification.

More importantly it redefined the relationship between Kim and his people and served a warning that there is a limit to how hard he can push an already beaten-down public, he said.NUCLEAR CARD

Few experts believe Kim's rule is in jeopardy. His people do not know of any alternative and accepted the message repeated in official media that the country's woes have been mostly caused by a hostile United States in an attempt to stifle its system and bring down its leaders.

Persistent energy shortages mean that two-thirds of its factories are idle and even with a bumper harvest, its food production still falls about 20 percent short of what is needed, according to data from the South.

In signs the North may be ready to return to nuclear talks, this month it hosted high-profile envoys from the United Nations and its biggest benefactor, China, with reports saying it was going to dispatch its top nuclear envoy to the United States next month.

South Korea's Yonhap news agency said the North had won a massive deal from China for investment that is worth more than half its annual economic output, which could speed a return to the six-way talks hosted by Beijing.

In North Korea, the emphasis was on the celebration.

Marking his birthday, called the country's February Holiday, synchronised swimmers, figure skaters and dancing art troupe visiting from Japan sang gloriously and longingly of Kim Jong-il as the invincible and kind-hearted leader, KCNA said.

They performed on the ice-rink 'Push Back the Frontiers of Science', 'Higher and Faster', 'Let Us Meet at the Front' and other numbers reflecting the iron faith and will of the service personnel and people of the DPRK, it said.

(Additional reporting by Christine Kim; Editing by Jon Herskovitz)