JERUSALEM, Sept 27 (Ari Rabinovitch/Reuters) - Israel allowed its halt in construction in Jewish settlements in the occupied West Bank to expire on Monday, defying a US call to extend the moratorium and risking a Palestinian withdrawal from peace talks.

Minutes after the moratorium expired, Israeli Prime Minister Benjamin Netanyahu urged Palestinian President Mahmoud Abbas to continue expedited, honest talks to achieve a peace agreement within a year.

Israel is ready to pursue continuous contacts in the coming days to find a way to continue peace talks between Israel and the Palestinian Authority, he said in a statement.

Abbas told reporters in Paris late on Sunday: If Israel chooses peace, we will continue to negotiate. If Israel doesn't it will be a waste of time.

Netanyahu has resisted calls from US President Barack Obama to extend the construction freeze but the United States said on Sunday it was trying to ensure both sides continued to negotiate despite Israel's decision.

Our policy on settlement construction has not changed. We remain in close touch with both parties and will be meeting with them again in the coming days, US State Department spokesman P.J. Crowley said in a statement.

We remain focused on the goal of advancing negotiations toward a two-state solution and encourage the parties to take constructive actions toward that goal.

U.S. Secretary of State Hillary Clinton had twice spoken to Netanyahu on Sunday, he said.

Netanyahu, whose governing coalition is dominated by pro-settler parties, earlier urged Jewish settlers to show restraint before the freeze ended at midnight.

His plea to settlers appeared aimed at persuading Abbas not to carry out his threat to quit negotiations launched in Washington on Sept. 2, unless the freeze were extended.

Palestinians say settlements will make it impossible for them to create a viable independent state and the issue is one of the core problems standing in the way of any peace agreement.

More than 430,000 Jews live in well over 100 settlements established across the West Bank and East Jerusalem on land that Israel captured from Jordan in a 1967 Middle East war. The World Court deems settlements illegal but Israel disputes this. Some 2.5 million Palestinians live in the same areas.

Netanyahu has held out the prospect of limiting the scope of renewed construction, a message he seemed to underscore in an official statement on Sunday.

The prime minister calls on the residents in Judea and Samaria (the West Bank) and the political parties to show restraint and responsibility today and in the future exactly as they showed restraint and responsibility throughout the months of the freeze, it said.

But settler leaders said they would begin erecting next week some 2,000 homes in the West Bank, where Netanyahu in November imposed under US pressure a partial moratorium on housing starts.


ABBAS STANCE

In his statement Netanyahu said he had been in touch with Clinton and the leaders of Jordan and Egypt in the past few days in search of a way to ensure the nascent negotiations continued.

He urged Abbas to continue the talks.

For the sake of the futures of both our peoples, let's focus on what is really important, let's continue expedited, honest talks in order to bring an historic framework agreement of peace within a year, he added.

Abbas has appeared to indicate the talks would not be suspended immediately upon the moratorium's expiration.

Asked in an interview with the pan-Arab newspaper al-Hayat, whether he would declare an end to the negotiations if the freeze did not continue, Abbas said: No, we will go back to the Palestinian institutions, to the Arab follow-up committee.

He was referring in the interview, published on Sunday, to an Arab League forum that gave him the go-ahead to pursue direct peace talks with Israel.

Abbas spokesman Nabil Abu Rdainah said the Palestinian leader had requested a meeting of the follow-up committee in Cairo and it would likely convene within days.