The Israeli government’s decision to expand settlements is “a slap in the face for [the] US president,” according to former PM Ehud Olmert. He is the latest to join both domestic and foreign criticism of Israel’s punitive actions against Palestine.

The Israeli government is unfreezing a controversial construction project in the occupied territories in retaliation for the Palestinian success at the UN. But the harsh stance is drawing criticism even from most loyal foreign allies of the Jewish state, including America. Meanwhile at home the hawkish prime minister faces resurge of opposition forces that can put his re-election prospects in doubt.

Netanyahu is enjoying a rise of popularity following the week-long war in Gaza, with his personal approval rating bouncing 11 percentage points, according to post-offensive polls. Together with his ally Avigdor Lieberman and ultra-orthodox and ultra-nationalist parties, he has a convincing lead two months ahead of the early election in January.

While maintaining domestic support, the Israeli PM is increasingly at odds with foreign friends. At the UN General Assembly vote on Thursday which granted Palestinians an upgraded status of non-member observer state, only nine countries voted against the proposition. Even nations that usually support Israel on most issues like Germany and Britain chose to abstain, and just one European nation, the Czech Republic, voted against.

“For Netanyahu to find himself all alone, with only a reluctant partner in Washington and seven other countries by his side, must surely have come as a shock,” wrote Foreign Policy magazine. It argues that Israel’s brief war with Hamas may have pushed Europeans to demonstrate approval for their Palestinian non-violent rival Fatah and its leader Mahmoud Abbas. The elected president of the Palestinian Authority (PA) champions the statehood bid, while Israel didn’t offer any tangible alternative, the magazine says.

Tough defiant stance

But rather than toning down its opposition to Palestinian statehood, the Netanyahu government is escalating the tension by taking a series of steps that can only be seen as punitive. Hours after the UN vote it announced construction of new homes in the occupied territories in the West Bank, the territory controlled by Fatah. The development would affect the sensitive E-1 area, the lands east of Jerusalem.

Critics of the previously frozen plan say that if it is carried out, it would dissect West Bank into northern and southern portions and isolate the Arab-inhabited East Jerusalem from the rest of the Palestinian territories. Daniel Seidemann of Ir Amim, a group that promotes coexistence in Jerusalem, called it “a doomsday scenario” that would “be the death of the two-state solution.”

The move was criticized by US Secretary of State Hillary Clinton and her British counterpart William Hague. Turkish and Arab top officials condemned the construction plan, with Turkish Foreign Minister Ahmet Davutoglu saying it was“the time to show strong reactions to Israeli policies which undermine the peace process.”

Saeb Erekat, an aide to Mahmoud Abbas, said Netanyahu was “defying the whole international community and insisting on destroying the two-state solution,” with the move.

On Sunday, Israel went on to withhold US$120 million worth of taxes it collected from Palestinians this month. The money would normally go to the PA and constitute a major portion of the Abbas government budget. Israel will hold this month’s allotment to cover West Bank’s electricity debt.

Israeli opposition gears up

Israeli opposition politicians took the chance to criticize Netanyahu’s hawkish stance. Former Foreign Minister Tzipi Livni, who said "the decision to build thousands of housing units as punishment to the Palestinians only punishes Israel … (and) only isolates Israel further."

Another veteran Israeli politician, former Prime Minister Ehud Olmert, called it “the worst slap in the face of a US president” who actually supported Israel by voting against Palestinian statehood.

Livni, who resigned from politics in May, made a sudden comeback on Tuesday leading a newly-established party. Olmert is rumored to also join the parliamentary run in a matter of days. An October opinion poll by Haaretz newspaper suggested that if the two were both taking parting in the upcoming election and joined forces with Yair Lapid form the new liberal party Yesh Atid, the left-centrist alliance would be strong enough to challenge the right-wing coalition.

• A Permanent Economic Emergency