Abbas: 'We have a state'

The new status comes two days after thousands of new Israeli settlements were announced in the West Bank.

A cheering crowd welcomed President Abbas back to the West Bank city of Ramallah on Sunday after his successful bid for the status upgrade.

"Yes, now we have a state," Abbas told a crowd gathered outside the presidential complex. "Palestine has accomplished a historic achievement at the UN.”

"If you work hard, God will always reward you," Abbas told those assembled. "You are the architects of this achievement and you are the owners of this victory."

Flags of the 138 nations that voted in favor of the resolution were prominently displayed at the reception.

On Wednesday, Palestine secured nonmember state observer status, winning a 138-9 vote in the United Nations General Assembly. Israel and the US opposed to the move. Germany abstained.

Israel said it would withhold tax and tariffs collected for the Palestinian territories in response to the upgrade.

Confiscated to pay debts

Finance Minister Yuval Steinitz on Sunday said he has "no intention of transferring taxes due to the Palestinian Authority this month."

"We said from the beginning that the raising of the status of Palestine at the UN would not produce no reaction from Israel," Steinitz said at the beginning of a weekly cabinet meeting.

A total of 460 million shekels (92.7 million euros, $121 million) will be confiscated, and instead used to pay off debts the Palestinian Authority owes to the Israel Electric Corp. for power supplied by the country.

Israel transfers tens of millions of dollars every month in customs duties which are levied on goods destined for Palestinian markets but travel through Israeli ports. Those funds make up a large percentage of the Palestinian budget.

Israel had announced that it would react harshly if Palestine moved forward with the vote. Prime Minister Benjamin Netanyahu called Palestine's appeal to the UN a "blatant violation of agreements signed with the government of Israel."

Hours after the UN vote, Israel also announced it was authorizing the construction of 3,000 new homes in the West Bank. The move, considered to be in reaction to Palestine's newly achieved status, drew international criticism.

UN Secretary General Ban Ki-moon criticized the new construction. "It would represent an almost fatal blow to remaining chances of securing a two-state solution," he said.

Israel's Cabinet also announced that it was rejecting the UN's upgrade of Palestine, saying it would not form a basis for negotiations between the two sides. The Cabinet said the UN could not change the status of what it called "the disputed areas," a reference to the West Bank.

dr, rc/mkg (dpa, AP, AFP, Reuters)