SEOUL- North and South Korea have been secretly trying to set up a summit by mid-year, news reports said on Tuesday, but the South insisted the destitute North would not be offered any payment to entice it to a meeting.

South Korean President Lee Myung-bak has said he wants a firm commitment from Pyongyang to rejoin disarmament talks and to scrap its nuclear arms programme before agreeing to what would be only the third summit between the states still technically at war.

A senior U.S. State Department official arrives in Seoul on Tuesday for discussions aimed at prodding the North back to nuclear talks after the mercurial state last week raised tensions by firing artillery toward a disputed sea border with the South.

The leaders of the South and North must meet only on the premise that there won't be any payoff for agreeing to hold the summit, Lee's spokesman quoted him as saying at a cabinet meeting. We'll never back down from this principle.

Analysts say pressure is mounting on the North to end its year-long boycott of the six-way nuclear talks, where it can win aid to prop up its broken economy by reducing the threat it poses to North Asia, which makes up one-sixth of the global economy.

Lee has been critical of the two previous summits where the North won pledges for billions of dollars of aid from the South, while Seoul received little in return as the North built up its conventional military forces, missile arsenal and nuclear plans.

North and South Korean officials have been secretly meeting in Singapore and the North Korean city of Kaesong to try to set up a summit, but hit a snag over South Korean prisoners from the 1950-53 Korean War still held in the North, news reports said.

North Korea prefers June 15, which is the 10-year anniversary of the first summit, but we feel there would be special meaning in making a breakthrough on denuclearisation on the 60th year of the (June 25) outbreak of the Korean War, the Chosun Ilbo newspaper quoted a government source as saying.

In a sign of the difficulty of brokering a complex summit, the two Koreas in talks on Monday were unable to make any breakthrough in a dispute over operations at a factory park that is their last major joint economic project.

PEACE TREATY

North Korea in recent weeks has called on the United States to hold talks on replacing the cease fire that ended the Korean War, while at the same time making military threats to U.S. ally South Korea.

Analysts see this is a ploy by Pyongyang to win concessions to lure it back to the bargaining table and put pressure on Washington for direct talks on a peace deal that can help open the door to international finance for the North.

A peace deal could help North Korea secure more aid, decrease the risks of the U.S. Treasury blocking its international finances and increase its chances of receiving funds from global financial groups including the World Bank.

Their provocations mean to show there is still uncertainty and instability on the Korean peninsula and the only solution to end these military moves is a peace agreement, said Kim Yong-hyun, an expert on the North at Dongguk University in Seoul.

North Korea's media on Tuesday again called for a peace treaty with the United States. The armistice was signed by U.S.-led U.N. forces and their opponents North Korea and China.

Our proposal is the fairest, most flexible and boldest measure that takes into view the urgency of the need to resolve the nuclear issue, the special nature of the current situation and the positions of all parties concerned, the North's official KCNA news agency reported.

(Additional reporting by Christine Kim; Editing by Jon Herskovitz and Jeremy Laurence)

South Korea