JERUSALEM/PARIS (Reuters) - Palestinian President Mahmoud Abbas on Monday put off a threatened decision to quit peace talks with Israel, leaving more time for diplomacy to save negotiations from collapse over Israel’s settlement building.

The United States, France, Britain and the United Nations said they were disappointed that Israel had refused to extend the freeze on settlement construction ordered by Prime Minister Benjamin Netanyahu 10 months ago to foster direct talks.

“We recognize that given the (Israeli) decision yesterday we’ve still got a dilemma that we have to resolve and there are no direct negotiations scheduled at this point,” U.S. State Department spokesman P.J. Crowley said.

U.S. Middle East peace envoy George Mitchell headed for the region on Monday evening and hopes to hold talks with Israeli and Palestinian officials on Wednesday and Thursday, Crowley said.

French President Nicolas Sarkozy said after talks with Abbas in Paris that the Palestinian leader and Netanyahu had accepted his invitation to peace talks before the end of October which Egyptian President Hosni Mubarak also has been asked to attend.

Briefing reporters after Secretary of State Hillary Clinton met Syrian Foreign Minister Walid Moualem in New York, Crowley also said Moualem was “very interested” in the possibility of reviving an Israeli-Syrian peace track.

Earth-moving equipment began work in at least three settlements in the occupied West Bank but there was little sign, during a Jewish holiday, of wide-scale resumption of construction following the 10-month moratorium’s midnight expiration.

“It’s all symbolic for now,” Israeli Housing Minister Ariel Atias told the YNet news website, questioning whether Defense Minister Ehud Barak, whose ministry oversees Israeli activities in the West Bank, would agree to issue new building permits.

‘SWIFT REACTIONS’

A window of at least one week was open for U.S. diplomatic efforts to avert what would be a major embarrassment for President Barack Obama -- the collapse of a peace process launched at the White House nearly four weeks ago.

Abbas, who had threatened to abandon the negotiations if settlement building was revived, said he would withhold his decision until after an Arab League forum met on October 4 and consultations with a Palestine Liberation Organization council.

“We will not have swift reactions now, to say ‘yes or no -- we want, or we don’t want,’” Abbas told a news conference with Sarkozy.

“Israel has a moratorium for 10 months and it should be extended for three to four months more to give peace a chance,” Abbas said.

The French leader, for his part, said “the settlements must stop.”

Palestinians fear settlements, built on land Israel captured from Jordan in a 1967 war, will deny them the viable state they hope to create in the West Bank and in the Gaza Strip. The Gaza Strip is run by Hamas Islamists opposed to Abbas’s peace efforts.

“I am certain we will still achieve (a peace settlement) and eventually the Palestinian state will be achieved,” Abbas said in Paris. “Most Israelis want peace and know that without it Israelis cannot live.”

Netanyahu has described demands for a further building freeze as unacceptable preconditions for peace talks and said the settlement issue should be decided at the negotiating table.

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The right-wing Israeli leader defied Obama’s call for a moratorium extension and avoided antagonizing pro-settler parties in his governing coalition.

“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,” Netanyahu said in a statement issued minutes after the freeze ended.

Netanyahu earlier urged settlers to show restraint once the 10-month period expired. He has held out the prospect of limiting the scope of renewed construction, a message he seemed to underscore in his public plea to them.

‘IN CLOSE TOUCH’

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In Washington, the State Department’s Crowley said U.S. policy on settlement construction had not changed. “We remain in close touch with both parties and will be meeting with them again in the coming days,” he said in a statement.

Nabil Abu Rdainah, an Abbas spokesman, told Voice of Palestine Radio: “We are waiting to hear the American position or to hear the latest from the Americans on the Israeli position. Until this moment, we are still waiting.”

Netanyahu imposed the freeze on housing starts in the West Bank settlements in November under pressure from Obama to help coax Abbas back into direct talks after a 20-month hiatus.

The moratorium did not cover homes whose construction was under way, and government statistics show nearly 2,400 units are currently being built on land Palestinians want for a state.

Settler groups pledged that construction would begin on some 2,000 homes next week, after the end of the Jewish religious festival of Sukkoth when many Israelis are on vacation and businesses operate on a limited holiday schedule.

Tightened Israeli security measures during the week-long holiday meant that Palestinian workers, who make up the bulk of construction crews in settlements, could not reach building sites.

One settler leader, Shaul Goldstein, said getting housing projects off the ground might not be easy.

“We have a serious problem of a lack of confidence in the decisions of the government and therefore a large section of the private builders has not yet started to build,” he told Army Radio.

“They want to see what the future holds and that everything will be fine. We have encouraged them to start (building).”

Nearly 500,000 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.