(Adds North Korea comments in paragraph 5-6)

SEOUL, June 6 (Reuters) - South Korea will not back down to communist North Korea after it raised global concerns last week with a defiant nuclear test and threats to attack its capitalist neighbour, the South's president said on Saturday.

The U.N. Security Council is looking to punish the reclusive North for its nuclear test which drew international condemnation, while a South Korean daily said U.S. officials are moving to clamp down on the impoverished state's meagre international finances. [ID:nSEO370261]

"There is no reason to fear as we have a strong defence ... There should be no doubt that there will be no compromise against things that threaten our people and security," President Lee Myung-bak said in address to mark the South's Memorial Day.

North Korea, which launched a barrage off short-range missiles last week, appears to be readying to test a long-range rocket that could hit U.S. territory.

Pyongyang's official media KCNA reiterated a warning of "strong action" on Saturday, blaming the South for increasing military tension.

It said South Korea "should not make any reckless move" as "anyone making provocation will be met with strong action and unimaginable punishment".

On Thursday in a step that could add to tensions with Washington, North Korea had put two U.S. journalists on trial for illegally entering the state.

Analysts say the two, Euna Lee and Laura Ling, who were working for the Current TV network co-founded by former U.S. Vice President Al Gore, have become bargaining chips in negotiations with the United States, which has long sought to end the North's nuclear ambitions.

Secretary of State Hillary Clinton said on Friday she hoped the trial would result in their speedy release and confirmed the United States had explored sending a special representative to Pyongyang to negotiate for the journalist's freedom.

"The trial which is going on right now we consider to be a step toward the release and the return home of these two young women," she told reporters in Washington. [ID:nWBT011329]

Clinton did not discuss any bilateral sanctions the United States was considering but made clear Washington wanted the "strongest possible" resolution to emerge from negotiations at the United Nations to punish the North for its recent actions.

The two Koreas will hold rare talks next week over a joint industrial park that was once a symbol of reconciliation but has become a flash point for tension between the two states, which have yet to reach a peace treaty to end their 1950-53 war.

North Korea in May declared all contracts in the park invalid in what analysts said was a ploy to squeeze more money from the South. It has also been holding a South Korean worker there for about three months on suspicion of insulting its leaders.

"The North must return our detained employee without condition and guarantee free corporate activities as promised," President Lee said.

About 100 South Korean small and medium sized companies use cheap North Korean labour and land to make goods at the Kaesong industrial enclave located just inside the communist state. (Additional reporting by Rhee So-eui; Editing by Jerry Norton)