Prime Minister Benjamin Netanyahu's decision to freeze the transfer of funds to the Palestinian Authority and build 3,000 housing units in the West Bank is nothing less than reckless behavior. The decision to punish the PA has provoked a confrontation with the international community, which voted overwhelmingly to accept the Palestinians as a nonmember observer state at the United Nations.

This policy is seriously threatening Israel. Friendly countries such as France, Britain and Sweden are considering recalling their ambassadors and revisiting their trade accords with Israel. This is a heavy price that cannot be explained away as an investment in national security.

Rather, it is a whim that might plumb new depths for Israel's international standing. After doing its utmost to prevent a boycott of Israeli goods - including legislation - the government has now given friendly countries a warrant to boycott.

The freezing of NIS 460 million, taxes collected by Israel in November, is explained away as a calling in of debts. But Israel must reach an agreement on these debts, as it has often done in the past, instead of crippling the PA and sentencing many Palestinians working in PA institutions to hunger and unemployment. Such steps won't change the UN General Assembly's resolution but will clearly expose Israel as intentionally undermining the peace process.

Netanyahu and his ministers have no right to make Israel an international pariah. Israel's security cannot be guaranteed by fighting against an already occupied Palestinian state, but by nurturing the international ties needed to face real threats like the Iranian nuclear program. The government cannot justify punishing the Palestinians by seriously undermining the Israeli economy; it must realize that Israel's standing is directly linked to its policies in the occupied territories.

Netanyahu should rescind his dangerous decision, unfreeze the funds and cancel the planned settlement drive before Israel's international standing approaches Iran's.