Finance Minister Yuval Steinitz (Likud) warned Monday that Israel would halt tax funds to the Palestinian Authority if it formed a new government with an unrepentant Hamas.

He spoke with reporters in the Knesset just hours after the Finance Ministry transferred $105 million in tax funds it withheld at the start of the month when Fatah first announced its intention to unify with Hamas.

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Steinitz said he had always intended the suspension to be a temporary measure, which warned of a more permanent step.

“From the start, I intended it as a yellow card for a week, and not as a red card. In the end it lasted two weeks. My goal was to show that when a [unity] government [with Hamas] is actually formed, then we won’t give them money at all,” Steinitz said.

Monday’s transfer of the tax funds comes in advance of Prime Minister Binyamin Netanyahu’s planned trip to the United States Thursday. The United States and the Quartet have pressured Israel in the last weeks to release the funds.

On Sunday both US Secretary of State Hillary Clinton and the Quartet’s special envoy to the Middle East Tony Blair called PA Prime Minister Salam Fayyad and informed him that Israel had agreed to release the funds.

On Monday morning Deputy Premier Moshe Ya’alon told Israel Radio that until a new government was formed, other critical relationships with the PA had continued as usual, including in the areas of security.

“If there are negative developments, the tax transfers will cease,” Ya’alon said.

An Israeli official told The Jerusalem Post that there would be political and economic consequences for the Palestinians should they unite with Hamas – unless Hamas agreed to to accept the Quartet’s three principles: renunciation of violence, recognition of Israel and acceptance of past agreements.

“We have sent an important message that if [unrepentant] Hamas is in the government, they [the Palestinians] can expect the [tax] funds to be put in escrow,” the official said.

But Noam Schalit, whose son Gilad has been held captive by Hamas in Gaza for almost five years, wrote a letter to Netanyahu and Defense Minister Ehud Barak protesting the transfer of funds.

The letter, signed by attorney Gilead Sher on behalf of the Schalit family, expressed its disappointment and requested information regarding the decision to transfer the money.

The new Palestinian government would have control over Gaza, and thus would be responsible for Gilad’s continued captivity, the family said in the letter. Schalit added in a statement to the media that holding his son hostage was a “war crime” under the Rome Statue.

At the start of the month, the family sent a letter to Netanyahu requesting that in light of the Fatah-Hamas unity deal, all task funds to the PA be halted until Gilad is released.

In Monday’s letter, the family asked if Gilad’s fate had been factored into the decision to hand over the funds, and if so, what the considerations under debate were.

In a statement to the media Schalit said, “The Schalit family regrets that the Israeli government folded so quickly.”

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