In a series of retaliatory moves against the Palestinian Authority, Israel on Tuesday night decided to accelerate Jewish construction over the pre-1967 lines and temporarily suspend the transfer of tax funds to the PA.The PA immediately slammed the two decisions made by the Inner Cabinet, a forum of eight ministers, which had convened for several hours.RELATED:'US cutting UNESCO funding deals blow to peace talks''Israel should've lauded Palestinian UNESCO vote first'Israel’s decision to build new housing units in east Jerusalem and two West Bank settlements will destroy the peace process, the PA warned.“It’s a blow to the Quartet efforts to achieve peace,” said Nabil Abu Rudaineh, a spokesman for PA President Mahmoud Abbas. “The talk about freezing tax revenues belonging to the Palestinian Authority is a provocation and theft of our money,” Rudaineh said. “We call on the Quartet and the US administration to put an end to these practices, which will have a negative impact on the whole region.The Inner Cabinet’s measures were a direct response to the PA’s continued pursuit of unilateral statehood in favor of a negotiated agreement with Israel.It issued the punitive steps just one day after the United Nations Educational, Scientific and Cultural Organization (UNESCO) accepted the Palestinian Authority’s bid to become its 195th member. The PA also plans to request membership in other UN agencies.Settlement construction has been a hot-button issue for the Palestinians, who have insisted that such building is a stumbling block to peace and that they will not talk with Israel unless it freezes such activity.Israel has refused to heed this demand. Despite this, Prime Minister Binyamin Netanyahu has a poor record of authorizing settler construction and Jewish building in east Jerusalem.It is unusual for his office – which placed a 10-month moratorium on new settlement building that ended in September 2010 and which has often been accused of imposing a “silent freeze” on Jewish building over the pre- 1967 line – to state upfront that it was “accelerating” such construction.You cannot demand from the Israeli public continued restraint when the Palestinian leadership continues to slam doors in their face,” said an Israeli official.“They refuse to condemn the rocket attacks that killed an Israeli citizen [on Saturday].They praised the kidnapping of Gilad Schalit and have refused to conduct peace negotiations while going for unilateral moves at the United Nations,” the official said. The building approvals include 1,650 units in east Jerusalem Jewish neighborhoods, 327 in two West Bank settlements, 277 in Efrat and 50 in Ma’aleh Adumim. All units were already in the planning stages but needed final approvals.Now according to an Israeli official, “they have been given a green light.” The official noted that all the building would occur in areas that would remain part of Israel in any final-status agreement with the Palestinians.Separate from the issue of construction, the Inner Cabinet agreed to put a “temporary hold” on the transfer of tax funds to the Palestinian Authority. It also contemplated canceling VIP passes for Palestinian officials which allow them to pass quickly through Israeli checkpoints in the West Bank.No decision was reached on whether Israel would make its annual payment of $2 million to UNESCO.On Monday, the United States said that it would freeze a $60 million payment to UNESCO scheduled for later this month.During a tour of the West Bank city of Hebron earlier in the day, Finance Minister Yuval Steinitz (Likud) said that it would be “strange” to continue to provide the organization with funds when the US has frozen financial support for UNESCO.But, he said, UNESCO didn’t initiate the Palestinian membership drive. So the primary response should be against those who instigated it, the PA under Abbas’s leadership.As such, Steinitz said, he had supported withholding tax funds from the Palestinian Authority since the PA began its clear unilateral pursuit of statehood.“For the last half a year, there has been a Palestinian strategy to make use of their automatic majority in international bodies to gain a state without peace, without security, without ending the conflict and without recognizing the State of Israel,” he said.“It is a betrayal of the very heart of the peace process. It can not pass silently.”Steinitz said he rejects claims that withholding funds could cause the collapse of the PA. In the past, under the governments of Ehud Barak and Ehud Olmert, the funds were frozen and the PA continued, albeit with difficulty.“No one wants to dismantle the PA,” Steinitz said. "Netanyahu’s government wants to make peace with it."“But if it plans to be a state that will be in conflict with Israel, I am not sure that our first interest is to preserve a PA government that could become a hostile state like Gaza,” he said.