Israel’s decision to build new homes near occupied East Jerusalem is evoking an unexpectedly strong response in Europe-with Britain and France considering withdrawal of their ambassadors from Tel Aviv in protest.

Reuters quoting a diplomatic source is reporting that Britain would finalise its decision on pulling out its envoy from Israel later on Monday. London is miffed about Israel’s decision to green-light construction, as it may have been taken to punish the Palestinians for successfully securing observer status at the United Nations General Assembly. A statement by the British embassy in Tel Aviv said, “The recent Israeli government decision to build 3,000 new housing units threatens the two-state solution and makes progress through negotiations harder to achieve”. It added that Britain has “called on the Israeli government to reconsider” its decision.

Israeli daily Haaretz is reporting that France, a fellow European Union (EU) member is also considering the recall of its ambassador from Israel, and is working together with Britain on a number of punitive steps.

The foreign policy chief of the EU, Catherine Ashton also urged Israel not expand construction activity in accordance with its new plan.

On Friday, Israeli government officials unveiled a plan to build 3,000 new settlement units in the so-called E-1 area that bisects the occupied West Bank. The decision was announced a day after Palestine was admitted to the U.N. as a non-member state.

In case Israel went ahead with the construction, it would disrupt the contiguity of West Bank with East Jerusalem, thus destroying the viability of a two state solution, premised on the emergence of an independent Palestine in the occupied territories, cohabiting peacefully with Israel.

Normally mild mannered, an infuriated Ban Ki-moon, the U.N. Secretary-General, slammed the Israeli move. “It would represent an almost fatal blow to remaining chances of securing a two-state solution,” said Mr. Ban. He added that the new settlements would completely cut off Palestinians in East Jerusalem from the rest of the West Bank.

The Israeli decision on settlements was followed up by Tel Aviv’s move to deprive Palestinians of around $100 million, collected by way of taxes on behalf of the Palestinian Authority. The Israelis say that this money would go the Israeli Electric Corporation as part payment for a $ 200 million debt that the Palestinians owe. Under the terms of past agreements, Israel collects certain taxes on behalf of the Palestinian Authority, before they are transferred.

Israeli Prime Minister, Benjamin Netanyahu, has so far dismissed the avalanche of international criticism against his plans. “We will carry on building in Jerusalem and in all the places that are on the map of Israel’s strategic interests,” he said on Sunday during a weekly Cabinet meeting.

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