SEOUL--North Korea on Tuesday threatened military action if the South continued to violate its waters off the west coast, further stoking tension on the peninsula after the sinking of a South Korean warship. The increasingly war-like rhetoric hit Seoul's financial markets, prompting financial policymakers to call an emergency meeting on Wednesday to look for ways to calm investors. "Should the South side's intrusions into the territorial waters of our side continue, the DPRK (North Korea) will put into force practical military measures to defend its waters as it had already clarified and the south side will be held fully accountable for all the ensuing consequences," North Korea's KCNA news agency quoted a senior official as saying. The furious war of words -- the North referred to the South's government as "military gangsters, seized by fever for a war" -- follows a report by international investigators last week which accused the hermit North of torpedoing the Cheonan corvette in March, killing 46 sailors. On Monday, South Korean President Lee Myung-bak cut trade with his impoverished neighbor and blocked its commercial ships from sailing through the South's waters. He also plans to take the issue to the U.N. Security Council. U.S. Secretary of State Hillary Clinton said in China on Tuesday that Washington and Beijing would work together to come up with an "effective, appropriate" response to the sinking. Both China and the United States say they want to see peace and stability on the peninsula, but agreeing on how to pursue it may be hard. Washington condemned the sinking, while China has been largely silent about the behavior of its volatile ally. Russia, which like China and the United States holds a veto in the Security Council, urged restraint. President Dmitry Medvedev urged both sides to "prevent a further escalation on the situation on the Korean peninsula".
