Israel accuses the Palestinians of trying to circumvent the negotiating process by seeking U.N. recognition. Although the vote did not change the situation on the ground, the international community endorsed the Palestinian position on future borders with Israel. Israel refuses to return to its pre-1967 lines.
In addition to the E1 project, Israel has responded to the Palestinians' U.N. move by cutting off a regularly scheduled $100 million tax transfer to the cash-strapped Palestinian Authority, and announced plans for several thousand new homes in existing settlements in the West Bank and east Jerusalem.
Israel's monthly tax transfers to the Palestinians — the result of taxes and customs duties that Israel collects on behalf of the Palestinians — are a key element in the Palestinian government budget. The government has already struggled to the pay the salaries of its tens of thousands of workers.
In a statement, Palestinian Prime Minister Salam Fayyad called on the international community to press Israel to release the funds and urged wealthy Arab countries to send $240 million a month to keep the government afloat while Israel withholds the money. Israel has taken similar measures in the past, ultimately releasing the money under international pressure after several weeks.