Updated 8.30am

ISRAEL IS TO free Palestinian tax funds.

It was withholding $100m in monthly Palestinian tax revenues for the past two months in an effort to punish the Palestinians for their attempts to join the United Nations.

According to CNN, the Israeli Defence Minister Ehud Barak said the money is “a part of the contribution to the stability of the Palestinian Authority and its security services in particular. ”

He is also reported as saying the decision is partly based on the fact Palestinians are ”backing off from some of their unilateral moves at the UN,” but CNN said it is not clear what these moves are as of yet.

But Israeli Foreign Minister Avigdor Lieberman remains opposed to the move, and said he believed the money would go to murderers and “to incitement to murder”.

Haaretz reports that Lieberman has backed down from threats to quit the government if Israeli Prime Minister Benjamin Netanyahu released the funds.

The Guardian reported that 153,000 of the Authority’s employees were affected by the decision to withhold funds, and one third of Palestinians depend on the salaries of public sector workers.

Palestinians were accepted to UNESCO as part of a broad effort for recognition as a full UN member state.

In accordance with interim peace deals, Israel collects some $100 million in customs, border and some income taxes each month on behalf of the Palestinians and relays them to the West Bank government.

The transfers were suspended on 3 November in reaction to the UNESCO admission.

It is obliged to pass the funds on under the terms of the 1993 Oslo accords.

- Additional reporting AP

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