The United States and several European countries have been urging Prime Minister Benjamin Netanyahu not to take drastic punitive measures against the Palestinians after they ask the United Nations to recognize their state.

Netanyahu, who is under heavy pressure from Foreign Minister Avigdor Lieberman, Finance Minister Yuval Steinitz and Deputy Prime Minister Moshe Ya'alon to respond strongly to the Palestinian Authority, has decided at this point to wait until the significance of the Palestinian move becomes clearer to commit to any course of action.

According to a senior diplomatic source in Jerusalem, U.S. envoys Dennis Ross and David Hill, as well as other American officials, have asked Netanyahu over the past two weeks not to take any steps that would destabilize the PA, such as cutting off security cooperation.

U.S. President Barack Obama last week told reporters that if Jerusalem suspends security cooperation with the PA as a result of the latter's approach to the United Nations, it would be only hurting itself.

A similar message was delivered to Netanyahu last week by EU Foreign Minister Catherine Ashton and German Foreign Minister Guido Westerwelle.

Netanyahu's national security adviser, Yaakov Amidror, who made an unreported visit to Berlin last Monday, got the same request from his German counterpart, Christoph Heusgen.

Defense Minister Ehud Barak and Intelligence Minister Dan Meridor are leading the opposition to sanctions against the PA. Both warn that it could lead to violence and the cessation of security cooperation between the PA and Israel, and could, under certain circumstances, lead to the total collapse of the PA, throwing responsibility for all of the West Bank's inhabitants back on Israel.

Barak met in New York yesterday with PA Prime Minister Salam Fayyad to discuss how to prevent a violent flare-up during Palestinian demonstrations that are planned during the PA's approach to the UN General Assembly.

Countering these international demands is heavy internal pressure on Netanyahu to punish the Palestinians for going to the United Nations.

The camp is led by Lieberman, who has spoken several times of the need to cut all ties with the PA in response to its approach to the United Nations. He has also called for a re-evaluation of the Oslo Accords.

Deputy Foreign Minister Danny Ayalon, who attended a conference of nations that contribute financially to the PA, said yesterday that if the PA continues to proceed in contravention of all the agreements that have been signed, which include those governing economic relations, "Israel will not have any legal or diplomatic obligation toward a Palestinian state, which will have been founded artificially, in breach of signed agreements."

Ayalon was thus hinting that Israel could cancel the tax-forwarding agreement it has with the PA and impose other economic sanctions.

Steinmetz, who also supports sanctions against the PA, has suggested measures meant to hurt the PA financially. During a meeting of Netanyahu's forum of senior ministers a few weeks ago, he presented a slide show that included a proposal to stop the transfer of customs levies that it collects for the PA, which comes to some NIS 400 million a month, even before the PA approaches the United Nations.

When Barak objected to this move, saying it would lead to the PA's collapse, Steinmetz presented a slide showing that Barak himself, as prime minister in 2000, had suspended these tax transfers to the PA for more than three months.

"They didn't collapse then, and they won't collapse now," Steinitz said.

Ya'alon suggested that Netanyahu declare Israel's intention to build thousands more homes in the settlement blocs as a response to the PA's statehood bid.

He has told confidants that he believes that "as far as the PA gets in the United Nations, that's how far our response should go." He also rebuffed suggestions that the PA could collapse, saying it wouldn't happen "because of the internal Palestinian interest," in keeping it afloat.

A senior figure in the Prime Minister's Office said that while Netanyahu personally tends toward Barak and Meridor's approach, there is a chance that he will nonetheless follow Lieberman's and Ya'alon's lead.

Netanyahu recently told a U.S. Congressional delegation not to rush to freeze American aid to the Palestinians, but rather to wait and see how their approach to the United Nations plays out.

The U.S. administration provides the PA with more than half a billion dollars to cover its budget. Several members of Congress, both Republicans and Democrats, have threatened to re-evaluate U.S. aid to the PA if it applies to the United Nations for statehood.