UN Secretary-General Ban Ki-moon told Prime Minister Benjamin Netanyahu on Friday that Israel should not withhold tax revenues from the Palestinian Authority following its unity deal with Hamas.

"The Secretary-General ... noted that Palestinian unity is a process which is just beginning now, and thus, it would be best to assess it as it moves forward," the UN press office said in a statement summarizing Ban's telephone call with Netanyahu.

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"He also urged Israel not to stop transferring tax revenues to the Palestinian Authority."

Ban said it was "urgent to overcome the impasse in the negotiations between Israel and the Palestinians. Continued drifting will not serve the interests of both parties."

"[Ban] said he was convinced that realizing a negotiated two-state solution as soon as possible is in the best interest of both the Israeli and Palestinian people," the statement added. "He said he hoped Israel will make decisive moves towards a historic agreement with the Palestinians."

He reiterated that the United Nations has consistently supported the idea of Palestinian unity under the leadership of Palestinian President Mahmoud Abbas.

Earlier Friday, the European Union said it would transfer 85 million euros ($124 million) to the PA in order to help it make salary payments and support vulnerable families, following the Israeli decision to halt tax transfers to the PA.

The Palestinian Authority on Sunday warned that it would not be able to pay salaries to its civil servants because of the government’s decision to temporarily halt the transfer of millions of dollars in tax revenue to the PA in response to the Hamas- Fatah unity deal.

PA Minister of Economy Hassan Abu Libdeh said that at least 170,000 civil servants would be affected if Israel carried out its decision.

Abu Libdeh told the Bethlehem- based Maan news agency that Israel has been transferring $80 million- 100m. in tax revenues to the PA each month. The PA would face a financial crisis if it did not receive the money, he said.

The government’s decision violated international law and was an “assault on the Palestinian economy,” Abu Libdeh said. The PA was seeking the help of the international community to force Israel to backtrack, he added.

Israel has twice before stopped the transfer of tax funds to the PA altogether: from December 2000 until July 2002 after the second intifada broke out, and from February 2006 – after Hamas won the Palestinian legislative elections – until July 2007, after Hamas seized control of the Gaza Strip.

Finance Minister Yuval Steinitiz’s postponement of Sunday’s meeting delayed the transfer of the funds, but did not halt it indefinitely. Such a step would have to be taken by either the security cabinet or the full cabinet.

An Israeli official told The Jerusalem Post that the cabinet would likely approve such a measure should Fatah and Hamas unite and form a joint government.

Khaled Abu Toameh and Tovah Lazaroff contributed to this report.

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