The West Bank city of Ramallah took on a festive mood Sunday as crowds thronged to the presidential compound to welcome Palestinian President Mahmoud Abbas home from New York.
Israel rejected the U.N. decision granting the Palestinian Authority non-member observer status, Netanyahu said at the start of the weekly cabinet meeting.
"A Palestinian state will not be established without assurances guaranteeing security for the people of Israel, without recognizing Israel as the state of the Jewish people and without the Palestinians announcing the end of the conflict," an Israel Radio broadcast quoted Netanyahu as saying.
The cabinet then unanimously passed a resolution rejecting the U.N. decision saying: "The Jewish people have natural, historical and legal rights to its homeland with its eternal capital Jerusalem." The cabinet said the U.N. resolution does not change the status of disputed areas and does not detract in any way from Israel and the Jewish people's rights to those areas, The Jerusalem Post reported.
Finance Minister Yuval Steinitz told the cabinet Israel will not transfer taxes it collects on behalf of the Palestinian Authority to them, in response to the U.N. decision, Israel's Channel 10 reported.
"We said ahead of the vote we will respond ... in the near future I intend to deduct debts owed by the Palestinian Authority to the electricity board and other places [instead of transferring the funds to them] ... and then we will see," he told Israel Radio.
In Ramallah, under a heavy security presence, thousands gathered at the presidential compound to give Abbas a hero's welcome home, Israel Radio said.
While the general mood was joyous, many Palestinians contend the upgraded status will not change anything on the ground, the radio network said. Large banners decorated the area, including one that read: "This land belongs to the state of Palestine. Israeli occupation must end immediately," the radio network reported. Inside the compound, the main building was draped with the Palestinian flag as well as flags of all the countries voting in favor of upgrading the Palestinian status at the United Nations, the network said.