* Finance Minister Yair Lapid heads centrist Yesh Atid party
* Pledges his party's support for peace efforts
* Lapid says peace deal could change government lineup
By Maayan Lubell
TEL AVIV, Dec 8 (Reuters) - Israeli Prime Minister Benjamin Netanyahu's main coalition partner publicly prodded him on Sunday to show "historic courage" and reach a peace deal with the Palestinians even at the risk of his government's collapse.
Finance Minister Yair Lapid, in a speech, reassured Netanyahu of his centrist Yesh Atid party's support and spoke of possible changes in the coalition - a nod to any future exit of far-right factions and their replacement by left-wing partners - should a land-for-peace agreement be achieved.
"I'm determined to do everything within my power to ensure that this government stays the course - even if developments in the peace negotiations necessitate a coalition realignment of one kind or another," Lapid said.
But he also appeared to issue a warning to Netanyahu, reiterating that Yesh Atid, which has 19 legislators in the 120-member parliament and is the second-biggest party in the coalition, would not remain in a government that did not genuinely pursue a negotiated settlement.
"I am not ready to have Yesh Atid serve as a fig leaf for pointless political manoeuvring," Lapid told an economic conference.
Speaking two days after meeting U.S. Secretary of State John Kerry who was on a visit to the region, Lapid gave no indication that U.S.-brokered peace talks, which began in July with a nine-month timeframe for success, were making progress.
But he said that accepting a narrative, voiced by opponents of a deal on both sides of the conflict, that nothing would come of the negotiations could turn into a self-fulfilling prophesy and destroy chances for an accord.
"We cannot continue pretending that peace does not involve paying a price - a heavy, painful, national and political price that both signatories of the peace agreement will be forced to bear," Lapid said.
"The prime minister has declared that he is aware of this price and of the notion that the only solution on the table is the implementation of the principle of two states for two peoples. I sincerely hope that he exhibits the kind of historic courage required to pay this price," he said of Netanyahu.
Israeli commentators have suggested in the past few weeks that Lapid was looking to win back disappointed dovish voters who have abandoned Yesh Atid for left-wing opposition parties.
In Washington on Saturday, U.S. President Barack Obama said he believed it was possible to reach a framework agreement over the next several months that would not address every detail of the Israeli-Palestinian conflict but could move things forward.
On Thursday, Kerry said he has presented Israel with "some thoughts" about improving its security under any eventual accord on establishing a Palestinian state.
Neither side has given details of the U.S. ideas. Israel has long said it would want to keep a military presence between the occupied West Bank and Jordan, as well as swathes of Jewish settlements - enclaves that most of the world deems illegal.
Hanan Ashrawi, a member of the executive committee of the Palestine Liberation Organization, rejected on Sunday what she said was Israel's demand to control the borders of a future state that Palestinians seek in the West Bank and Gaza Strip.
"It means that Israel does not want a peaceful solution and does not want to abide by the international law and the peace obligations and is making impossible conditions," she told Voice of Palestine radio.
Netanyahu has voiced concern that without stringent security arrangements, Palestinian militants could attack Israel from the West Bank after any Israeli pullout, much as they have done from the Gaza Strip, now run by Hamas Islamists, since an Israeli withdrawal in 2005. (Writing by Jeffrey Heller; Editing by Alistair Lyon)