JERUSALEM (Reuters) - Israel's cabinet decided on Monday to continue to withhold tax revenues owed to the Palestinian Authority and international envoys ended talks with no sign of a breakthrough in efforts to restart peace talks.
The freeze on the transfer of funds collected by Israel on behalf of the Palestinian Authority was imposed on November 1, a day after the Palestinians won full membership of the U.N. cultural agency UNESCO as part of their unilateral drive for statehood.
The money includes duties on goods imported to the Palestinian territories, amounting to some $100 million per month and is vital to the payment of civil servants' salaries.
"There is no change in the Israeli position of a temporary withholding of funds," a government official told Reuters after cabinet ministers voted narrowly in favor of the extension.
Israeli Army Radio said Defense Minister Ehud Barak had pushed for the freeze to be lifted, cautioning that a cash crunch could weaken the Palestinian Authority, which cooperates with Israel in stopping anti-Israeli violence in the West Bank.
UNESCO was the first U.N. agency to admit the Palestinians as a full member since Palestinian President Mahmoud Abbas applied for a full seat at the United Nations on September 23 in the absence of peace talks that collapsed more than a year ago.
Yasser Abed Rabbo, a senior Palestine Liberation Organization official said the Israeli cabinet decision, taken while international envoys were in the region trying to restart negotiations, was "an indication Israel is continuing its political and economic war against the authority."
A statement issued by the Quartet of Middle East peace envoys after they had met Palestinian officials in Ramallah and an Israeli official in Jerusalem said they would return for a further meeting next month.
"Envoys called upon the parties to create a conducive environment for restarting talks and urged the parties to refrain from provocative actions," the statement said.
The Quartet is made up of the United States, Russia, the United Nations and the European Union.
An Israeli government official said after the meeting that the Palestinians, who have demanded Israel halt all settlement activity in territory it captured in a 1967 war, had not demonstrated willingness to reopen direct peace talks.
"We regret that the Palestinians remain entrenched in their old ways and are saying that they want to restart talks but in fact, they are not prepared to start talking," said the official, who declined to be identified.
Palestinians say they fear settlements Israel has built in the West Bank and East Jerusalem, also captured in the 1967 conflict, will deny them a viable and contiguous state.
Citing historical and Biblical links to the territory and security concerns, Israel says it intends to hold on to major settlement blocs in any future peace agreement. The World Court regards Israeli settlements as illegal. Israel disputes this.
In the wake of the UNESCO vote and what the Palestinians saw as a reprisal, Israeli Prime Minister Benjamin Netanyahu's cabinet also decided to accelerate construction in the settlement enclaves it plans to keep, a move that has drawn international condemnation.
In May, Israel temporarily withheld Palestinian revenues in response to a reconciliation pact between Abbas and the Hamas movement which governs the Gaza Strip and is deeply hostile to Israel.