- Associated Press - Sunday, December 2, 2012

JERUSALEM — Israel on Sunday roundly rejected the United Nations’ endorsement of an independent state of Palestine, announcing it would withhold more than $100 million collected for the Palestinian government to pay debts to Israeli companies.

It was the second act of reprisal since the U.N. General Assembly voted overwhelmingly on Thursday to support the Palestinians’ statehood initiative.

On Friday, Israel announced it would start drawing up plans to build thousands of settlement homes, including the first-ever residential developments, on a sensitive piece of land near Jerusalem. Actual construction would be years away.

Prime Minister Benjamin Netanyahu declared the statehood campaign, led by Palestinian Authority President Mahmoud Abbas, as “a gross violation of the agreements signed with the state of Israel.”

“Accordingly, the government of Israel rejects the U.N. General Assembly decision,” he said.

Israel, backed by the U.S., campaigned against the statehood measure, arguing that only negotiations can deliver a Palestinian state.

Mr. Abbas returned home Sunday to a hero’s welcome in the West Bank city of Ramallah.

Some 5,000 people thronged a square outside his headquarters, hoisting Palestinian flags and cheering. Large posters of the Palestinian leader, whose popularity had plummeted in recent months, adorned nearby buildings.

“We now have a state,” he said to wild applause. “The world has said loudly, ‘Yes,’ to the state of Palestine.”

Mr. Abbas warned of “creative punishments” by Israel. Referring to the latest settlement construction plans, he said: “We have to realize that your victory has provoked the powers of war, occupation and settlements because their isolation is deepened.”

The U.N. resolution endorsed the Palestinian position that its state includes the West Bank, East Jerusalem and the Gaza Strip, territories captured by Israel in the 1967 Mideast war.

Israel rejects a full pullback to its 1967 borders, and says the resolution is a way to bypass negotiations.

In Sunday’s response, Finance Minister Yuval Steinitz said the government would withhold taxes and customs collected from Palestinian laborers and businesses on behalf of Mr. Abbas‘ Palestinian Authority.

The money will be used to help pay off the authority’s debts to Israel, including $200 million owed to the state-run Israel Electric Corp., government officials said.

This month, more than $100 million was to have been transferred. Mr. Steinitz said Israel would decide later whether to withhold future transfers as well.

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