A Fatah spokesman warned on Sunday that Israel's settlement expansion and withholding of PA tax revenues would have "disastrous results for the entire region."

Fayiz Abu Aita said the measures announced by the Israeli government the day after UNESCO admitted Palestine as a full member were an attempt to undermine the Palestinian Authority.

"This is a declaration of war" on the PA, Aita said in a statement issued by the Media and Culture Commission.

"Israel bears full responsibility for this dangerous escalation."

Israeli Prime Minister Benjamin Netanyahu called for the accelerated construction of some 2,000 housing units in East Jerusalem and the West Bank on Tuesday, in what he later denied was a punishment for the UNESCO vote, saying Israel had the right to build anywhere in Jerusalem.

Israel seized East Jerusalem in a 1967 war and annexed the land, regarded as the future capital of an independent Palestine, in a move not recognized by the international community.

Israel also decided last week to withhold customs revenues collected by Israel on behalf of the PA, amounting to almost half of the government's domestic revenue base. Israel controls all entry and exit points into Palestinian territories, including the flow of goods.

Aita called the moves a "miscalculated Israeli adventure," warning that attempts to destabilize the Palestinian Authority would impact the wider Middle East.