Amid ongoing Palestinian efforts to unilaterally obtain recognition of statehood in the United Nations in September, members of Israeli Prime Minister Benjamin Netanyahu's Likud-led cabinet are reiterating calls for Israel to respond with a unilateral annexation of the West Bank.

"If they take steps, we will take steps. I think that we need to immediately annex all of the territories on the same day (the UN declares the establishment of Palestine)," Welfare and Communications Minister Moshe Kahlon told an audience at a meeting of the Likud's young leadership forum on April 28.

The minister's comments were secretly recorded by a radio reporter who attended the closed event and broadcasted Saturday night by Israel's Channel 2.

"Kahlon believes that Netanyahu has undertaken far-reaching steps to promote the peace process with the Palestinians, his Bar- Ilan speech, freezing settlement construction in the West Bank for 10 months, the removal of dozens of road blocks in that area, and is set to offer additional concessions (in a speech before the U.S. Congress in May)," a source close to the Israeli government told Xinhua on Sunday.

"In return, the Palestinians are initiating a unilateral move. Israel has to announce that it will be reciprocated with a unilateral annexation of Jewish settlement blocs in the West Bank, " the source said.

Kahlon isn't the only Likud minister voicing the idea in recent weeks.

Public Diplomacy and Diaspora Affairs Minister Yuli Edelstein on Wednesday opined that Israel should not wait until September to announce annexation of the West Bank, but rather immediately, as well as initiate other measures, noting that the Palestinian National Authority (PNA) has "chosen a strategy of terror and unilateralism."

"Israel, too, must present an initiative: to assert Israeli authority throughout the entire land of Israel and put an end to the idea of a Palestinian state."

The comments came after an Egyptian-brokered agreement to form a Fatah-Hamas national unity government was announced in Cairo on Wednesday, a move that caught Israeli decision-makers off guard, prompting fears that the moderate Palestinian leadership, headed by PNA President Mahmoud Abbas, will further distance itself from a peace process with Israel.

Defense Minister Ehud Barak expressed Israel's concerns over the new alliance in a phone conversation with UN Secretary-General Ban Ki-moon over the weekend, noting that Islamist group Hamas is a "terrorist organization that fires rockets at Israeli communities and only recently targeted a school bus with an anti- tank missile."

"We expect the world's leaders, including the heads of the UN, to cooperate with a new Fatah-Hamas government, if it were to eventually be established, on recognizing the conditions set by the Quartet: recognizing Israel, abandoning terror and accepting all previous agreements with Israel," Barak said.

Opposition leader Tzipi Livni of the Kadima party echoed Barak, saying that since Hamas "represents an ideology that will not enable to end the (Israeli-Palestinian) conflict, the Palestinians have to understand that meeting the conditions laid down by the Quartet is important to the entire international community as a test of the new Palestinian government's character and aims."

Meanwhile, Israel's Finance Minister Yuval Steinitz on Sunday announced that his ministry has been ordered to withhold some 300 million shekels (88 million U.S. dollars) in taxes and customs revenues to the PNA in the wake of last week's Fatah-Hamas reconciliation accord.

Steinitz told Army Radio that transfer of the funds, which amount to more than one billion dollars annually, about two-thirds of the PNA budget, will be resumed only when Israel gains proof that the money would not reach Hamas militants and used to finance its military activities.

Palestinian officials slammed the step, calling it "financial piracy."

Chief Palestinian negotiator Saeb Erekat said the accord with Hamas was an internal Palestinian matter and that the Israeli decision is "financial piracy that reflects Israel's dangerous intentions."

PNA Prime Minister Salam Fayyad commented on the Israeli move, saying that it will not prevent the new agreement from occurring.