Palestinian President Mahmoud Abbas has been greeted by cheering crowds as he returned to the occupied West Bank after his successful UN bid for upgraded diplomatic status for Palestine.
The celebrations took place despite Israel's announcement on Sunday that it was withholding $120m in tax revenue that it collected for the Palestinian Authority (PA) in November.
About 5,000 people thronged a square outside Abbas's headquarters in the city of Ramallah, waving Palestinian flags and cheering their leader's return from New York.
"We now have a state," Abbas told his audience. "The world has said loudly, `Yes to the state of Palestine'.''
The vote to recognize Palestine as a non-member observer state has angered Israel, which said - hours after the UN General Assembly passed the vote - that it would construct thousands of new settler homes in East Jerusalem and the West Bank.
Under interim peace deals, which Israel says the Palestinians violated by unilaterally seeking the upgrade, Israel collects about $100m a month in duties on behalf of the authority.
Israeli officials said the PA owes about $200m to the Israel Electric Corporation and that money will now be deducted from the tax transfers.
"I have no intention of transferring the taxes due to the Palestinian Authority this month," Yuval Steinitz, Israel's finance minister, said on Israeli radio.
"They will be used to pay the PA debts to the Israeli electricity company and other bodies."
'Piracy and theft'
The already financially troubled PA, which exercises limited self-rule in the West Bank, largely depends on the tax money to pay civil servants' salaries.
Yasser Abed Rabbo, a senior Palestinian official, said Israel was guilty of "piracy and theft" by refusing to hand over the funds.
Israel has previously frozen payments to the body during times of heightened diplomatic tensions.
On Friday, Israel revealed plans to build 3,000 settler homes in the West Bank, including annexed East Jerusalem, and to revive a dormant project in a highly contentious area known as E1, a corridor that runs east from the far edge of Jerusalem into the heart of the West Bank.
UN leader Ban Ki-moon warned on Sunday that any Israeli move to revive that project would deal an "almost fatal blow" to any prospects for peace.
"Settlements are illegal under international law and, should the E1 settlement be constructed, it would represent an almost fatal blow to remaining chances of securing a two-state solution," Ban's office said in a statement.
Ready to do it
Abbas called on Israel on Friday to halt the settlement construction and return to peace talks.
"I've said a thousand times that we want to resume negotiations and we are ready to do it," Abbas told reporters in New York.
"We are not setting any condition but there are at least 15 UN resolutions which consider settlement activity as illegal and an obstacle to peace which must be removed."
Al Jazeera's Nicole Johnston, reporting from Ramallah, said the new settlements would mean a 25km journey from Bethlehem to Ramallah would be more than quadrupled to 120km as Palestinians would be forced to circumvent the settlements.
This move, said Johnston, would make it "very difficult for Palestinians to have any kind of a contiguous state" in the future.
PHOTO CAPTION
Palestinian President Mahmoud Abbas, center, is surrounded by children during celebrations for the successful bid to win U.N. statehood recognition for Palestine in the West Bank city of Ramallah, Sunday, Dec. 2, 2012.
Aljazeera