By Ranga Sirilal

COLOMBO, Jan 4 (Reuters) - Nordic ceasefire monitors began wrapping up their 6-year mission to Sri Lanka on Friday after the government scrapped a truce with the Tamil Tigers, and their mandate, amid a chorus of international concern.

President Mahinda Rajapaksa's administration formally notified mediator Norway late on Thursday it was giving a stipulated 14-day notice period to end the truce.

That means the gloves finally come off on Jan. 16, and analysts and diplomats expect an intensification of the fighting that resumed almost as soon as Rajapaksa took power in late 2005 as the truce effectively broke down on the ground.

The Nordic Sri Lanka Monitoring Mission, which kept a tally of violations of the truce agreement, was initially seen as a deterrent to human rights abuses by both sides but became increasingly ineffective as its access in conflict areas was hampered. Its role ends with the ceasefire.

"We're beginning to move towards (a pull-out)," a spokeswoman for the monitors said. "It's not far, it's only a few days. We of course have offices and personnel all over the place, so yes, we're definitely moving towards that."

The end of the truce dashes hopes of resurrecting collapsed peace talks anytime soon. Analysts expect the 70,000 death toll from the 25-year-long civil war to continue its inexorable rise.

Fighting continued in the north on Thursday, when both the military and the Tigers said they had killed around a dozen foes.

INVESTORS WORRIED

Sri Lanka's stock market <.CSE>, which fell 1.2 percent on Thursday as investors worried escalation could hurt the $26 billion economy, was down another 1.0 percent at the Friday midsession.

The government opted to cancel the ceasefire after a series of deadly bombings blamed on the Liberation Tigers of Tamil Eelam, who are fighting for an independent state in north and east Sri Lanka.

It said the insurgents, widely outlawed as a terrorist group, had simply used the pact to regroup and rearm, had violated the terms thousands of times and would not talk peace sincerely.

The government says the door to talks remains open if conditions change or the Tigers lay down their arms, which the rebels have vowed they will not do.

The Tigers said on Thursday they were reserving judgment until Norway officially notified them of the end of the truce.

The government's move drew widespread international criticism.

In Washington overnight, U.S. State Department spokesman Sean McCormack said America was troubled by a decision that would "make it more difficult to achieve a lasting, peaceful solution to Sri Lanka's conflict".

"We call on both the government and the Liberation Tigers of Tamil Eelam to avoid an escalation of hostilities and further civilian casualties," he said in a written statement.

U.N. Secretary-General Ban Ki-moon regretted the government's decision and was "deeply worried" that the withdrawal came amid intensifying violence, spokeswoman Michele Montas said.

Rights groups also joined the fray.

"The Sri Lanka Monitoring Mission was deeply flawed, but its monitors helped to minimise abuses against civilians," said Elaine Pearson, deputy Asia director at Human Rights Watch.

"Civilians caught up in the fighting will have a harder time finding safety once the monitors have withdrawn," she said in a statement. "Now the need for a U.N. monitoring mission is greater than ever."

The government, increasingly isolated internationally, has ruled that out. (Writing and additional reporting by Simon Gardner in Karachi. With reporting by Patrick Worsnip at the United Nations and Paul Eckert in Washington; editing by Roger Crabb)

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