The Netanyahu government is yet again confusing muscle-flexing with responsible policy.  The cabinet has approved the proposal fronted by Finance Minister Yuval Steinitz and  backed by Strategic Affairs Minister Moshe Ayalon to withhold tax revenues collected on behalf of the Palestinian Authority.

The arrangement was agreed upon and has been in force since the signing of the Oslo Accords in 1993. The provision calls for Israel to remit taxes and custom revenues gathered on behalf of the Palestinians and forward them to Ramallah on a regular basis. It is from these funds that the Authority pays its workers, including security personnel.

It should be stressed that the recent period of "quiet" in the West Bank derives from the cooperation between Israeli security forces and their Palestinian counterparts. This is perhaps the only remaining ties between official Israeli and Palestinian bodies and this vital collaboration is gravely endangered by the government's freezing of the operating funds due to the Palestinian Authority and upon which its governance depends.

The cabinet's decision is meant to "punish" the Palestinian leadership for the audacity of seeking UN recognition of a state. While the recent initiative by President Mahmoud Abbas was ill-advised – it is an attempt to circumvent a negotiated resolution to  the conflict based on talks with Prime Minister Netanyahu's government –   it was an understandable tactic to promote Palestinian independence given the current stalemate in peace negotiations. Frustrated by official Israeli foot-dragging and the provocative policies of the Netanyahu government, they have sought to prosecute their claim to independence by seeking recognition from the international community.

In this context the cabinet hawks, whom the prime minister refers to as his natural allies (and that function as his superego), believe it is  in Israel's national interests to bring the Palestinian leadership to heel, patronizingly, "punishing them" for going to the UN.

The consequence of such policy could soon be dire for Israel.

Not only does the policy endanger the security cooperation with the Palestinians, it imperils the survival of the relatively moderate Abbas government – something which Foreign Minister Avigdor Lieberman, according to his statements of recent weeks, is very interested in achieving.         

The attempt to bankrupt the Abbas government likely contributed to the announcement yesterday's that the West Bank leadership led by the Fatah movement has agreed to a unity government with extremist Hamas regime in Gaza. Palestinian Prime Minister Salam Fayyad, recognized by many Israelis and internationally as a state- builder and opponent of terrorism,  also announced his intention to resign. Elections for a new Palestinian parliament and government have been scheduled for May. This situation favors the militants and further erodes the position of Palestinian moderates.

Israel's hawks and extremists are undoubtedly pleased by this situation. In fact, there is a credible case to be made that they created it by design: It enables them to perpetuate their narrative of "there is no one to talk to," and maintain their rejection of a peaceful accommodation with the Palestinians.

In the long series of blunders, ill-conceived policies, outrageous laws and general belligerency favored by the Israeli right, the refusal to pass on monies that belong to the Palestinian is reckless machismo. It is part of a general spirit of the age which, if not checked, will deeply wound Israel, body and soul.