Reporting from Jerusalem —
World leaders Monday criticized Israel's refusal to extend its construction moratorium on the West Bank even after Palestinians threatened to quit Mideast peace talks, but they vowed to prevent the stalled negotiations from collapsing.

"We are disappointed but we remain focused on our long-term objective and will be talking to the parties about the implications of the Israeli decision," U.S. State Department spokesman Philip J. Crowley said. "Given the decision yesterday, we've still got a dilemma that we have to resolve and there are no direct negotiations scheduled at this point."

British Foreign Minister William Hague said he was "very disappointed" that Israel did not extend the freeze, which began in November; U.N. Secretary-General Ban Ki-moon called Israel's building on territory it has occupied since the 1967 Middle East War "illegal."

French President Nicolas Sarkozy called for a Paris summit with Israeli Prime Minister Benjamin Netanyahu, Palestinian Authority President Mahmoud Abbas and Egyptian President Hosni Mubarak to discuss solutions to the construction dispute.

The Obama administration, which said it continues to oppose Israel's settlement expansion, dispatched Mideast envoy George Mitchell to the region in an attempt to find a compromise that would persuade the Palestinians not to quit the talks, as they threatened to do if Israel did not extend the moratorium beyond Sunday's expiration.

After a meeting with Sarkozy in Paris on Monday, Abbas said he had not made a final decision on whether to leave the U.S.-brokered negotiations. He plans to consult with Arab League members at a meeting in Cairo on Monday.

"We are not rushing to respond, and we will study the consequences and their effect on the negotiations," he said.

In a statement early Monday, Netanyahu called on Abbas to remain in the talks, but he has not commented further.

Under one possible compromise, according to a report in the Maariv newspaper, Israel would agree to extend the freeze for a few months in exchange for written U.S. commitments to support Israeli positions in the broader peace negotiations on security. The compromise would also call for Palestinians to recognize Israel as a Jewish state.

Palestinians, according to the Maariv report, would receive American assurances on their positions regarding the borders of a Palestinian state and the status of Jerusalem.

Though Netanyahu has asked government officials to refrain from commenting on the sensitive issue, one of his top Cabinet ministers, Vice Prime Minister Silvan Shalom, said in a speech Monday in the West Bank city of Hebron that the settlement freeze was a "mistake" that should not be repeated.

"The Palestinians are now asking to extend the settlement moratorium by three months, and I say that even 10 months was excessive," Shalom said.

In the West Bank on Monday, bulldozers began working in several locations, including the city of Ariel, where 50 apartments are being built.

But activity started out slower than expected, partly because of concerns that Netanyahu might impose new restrictions and because of the Jewish holiday Sukkot, which ends this weekend.

The end of the freeze clears the way for construction of up to 2,000 housing units, which had received government approvals before the moratorium was imposed.