SEOUL- North Korea is not near collapse and leader Kim Jong-il has recovered from his illnesses, but the destitute state is hurting from U.N. sanctions imposed for its nuclear test, South Korea's President Lee Myung-bak said.

Lee also dismissed North Korea's firing of a barrage of artillery rounds this week at a disputed naval border as an attempt to pressure Washington into agreeing a peace treaty. Such a tactic would not work, he added.

Analysts have said tightened U.N. sanctions imposed after the North's nuclear test last year have badly hit its failing economy.

The North's wobbly economy has also been hit by currency control measures it imposed at the end of last year that made it more difficult for its impoverished people to buy goods.

The move has sparked inflation and a decrease of goods on the shelves, leading to reports of unrest among an already impoverished public who are having more trouble buying goods.

Economically the North Korean society is faced with great difficulties, but that's something that's been going on for some time, Lee said in Davos, Switzerland, where he is attending the World Economic Forum.

So we don't see that the North is in an extreme situation or on the verge of collapse, said Lee, in an interview with the BBC which was made available by Lee's office in Seoul on Friday.

The North's reclusive leader disappeared from public view in late 2008 and resurfaced months later from a suspected stroke, looking gaunt and markedly thinner, but South Korean officials have said his grip on power has remained firm.

Meeting China's premier in October, Kim said his country was willing to return to aid-for-disarmament talks, but only if the conditions were right.

The North has since demanded talks with the United States to reach a peace treaty to replace the armistice that ended the 1950-53 Korean War.
Washington said the North has to return to the nuclear talks first and live up to past commitments to disarm.

North Korea fired hundreds of rounds of artillery over two days this week in the direction of a disputed naval border with the South in a move seen as pressuring the United States for peace talks.

There could be many reasons. It's being pushed hard to come to the six-way talks, and it could be a strategy to reach a peace treaty, Lee said. But this is simply not a very good method.

Rounds landed on the North's side of the maritime border off the west coast of the rival states, which remain technically at war and share one of the world's most militarised borders.

The United States signed the armistice at the end of the 1950-53 Korean War with the North and China.

(Reporting by Jack Kim; Editing by Jeremy Laurence)

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