SEOUL (AFP) - North Korea on Saturday blasted South Korean President Park Geun Hye's proposal on laying the groundwork for reunification through economic exchanges and humanitarian aid as the "daydream of a psychopath".

The blistering attack from the North's powerful National Defence Commission (NDC) was the first official reaction from Pyongyang to a proposal Ms Park made in a speech last month in Dresden in the former East Germany.

She urged the North to expand reunions of families separated by the division of Korea and increase cross-border economic and cultural exchanges, starting with the South bolstering humanitarian aid.

"Germany's unity is for us an example and model for a peaceful reunification," she had said.

An NDC spokesman noted that German reunification came about with the West absorbing the East and accused Ms Park of begging foreign countries to help a reunification in which South Korea absorbed the North.

"This is merely a daydream of psychopath", he said, denouncing Ms Park's proposal, billed as the "Dresden Declaration" by Seoul, as "nonsense" full of "hypocrisy and deception".

"The fact that in that particular place, Park Geun Hye lashed her tongue about reunification gave away her sinister mind", he said in a statement carried out by Pyongyang's state media.

Reunification is however enshrined as a national priority in both the South and North Korean constitutions, but pro-merger sentiment in the prosperous South has waned considerably in recent years.

The North Korean spokesman urged Seoul to abide by earlier agreements including a landmark agreement signed in 2000, stressing all these previous accords gave priority to addressing the issue of easing military confrontation.

Tensions on the Korean peninsula remain high since the South launched annual military exercises with the United States in February, described by Pyongyang as a rehearsal for an invasion against the North.

In a pointed protest at the exercises, Pyongyang carried out a series of rocket and missile launches, capped by its first mid-range missile test since 2009 on March 26.

The two Koreas also traded artillery fire across the tense Yellow Sea border on March 31, after the North dropped around 100 shells across the maritime boundary during a live-fire drill.

The exchange followed a North Korean warning that it might carry out a "new" form of nuclear test - a possible reference to a uranium-based device or a miniaturised warhead small enough to fit on a ballistic missile.

Ms Park also said in the Dresden speech that the South would help funnel international funding to the North's economic development should Pyongyang give up its nuclear weapons programmes.

But the NDC spokesman said: "They should bear in mind that the tongue-lashing of Park Geun Hye is the first root cause of deteriorating the North-South relations and beclouding the prospect of the nation."

"It is the unanimous view of the public that the North-South relations will be smoother than now only if Park keeps her disgusting mouth closed", he said.

Despite its verbal attacks, professor Yang Moo Jin of the University of North Korean Studies said Pyongyang was likely to ease up and return to dialogue late this month as the South and the United States were winding up their military exercises.

Diplomatic efforts to resuscitate long-stalled six-party talks on disarming North Korea also appear to have been rekindled.

The US State Department said on Friday that special envoy Glyn Davies would meet with his Chinese counterpart Wu Dawei in New York and Washington next week for discussions on the denuclearisation of North Korea.