Binyamin Netanyahu, Israel's prime minister, has ordered the building of 2,000 new housing units for Israelis, mainly in illegally occupied East Jerusalem, an area Palestinians account as the capital of their future state.

Netanyahu said in a statement on Tuesday that the new construction would include settlements that he believed would be part of Israel in a future peace accord. Israeli settlements built on occupied Palestinian land are considered illegal under international law.

Israel also decided on Tuesday to freeze the transfer of tax revenues owed to the Palestinian Authority, as a punitive measure after Palestine was granted full membership of UNESCO, the United Nations' culture and heritage agency, media reports said.

The decision was taken at a meeting of the Forum of Eight senior ministers, chaired by Netanyahu, Israel's public radio said.

An Israeli official said the accelerated construction was an answer to the moves being made by the Palestinian Liberation Organization at the UN in pursuit of statehood recognition.

He was speaking on condition of anonymity due to the sensitivity of the issue.

"You can't demand from the Israeli public to continue to show restraint when the Palestinian leadership continues to slam the door in their face," said the official.

He said 1,650 of the new tenders are for units in East Jerusalem, while the rest are for Efrat and Maale Adumim, two illegal settlements in the occupied West Bank.

Palestinians object to Israeli housing in East Jerusalem and demand an end to all construction in the settlements before direct talks can resume. Israel rejects that as a precondition.

PHOTO CAPTION

Israeli Prime Minister Benjamin Netanyahu gestures as he speaks during the opening session of the Knesset Israel s parliament in Jerusalem Monday Oct 31 2011

Al Jazeera