Britain and France are poised to take action possibly including the unprecedented step of recalling their ambassadors, according to senior European diplomats in protest at Prime Minister Benjamin Netanyahu’s decision to move settlement construction ahead in the area known as E1, between Ma’aleh Adumim and Jerusalem.

“This time it won’t just be a condemnation, there will be real action taken against Israel,” a senior European diplomat said.

Netanyahu’s decision Friday to move ahead on planning in E1 and to build 3,000 housing units in the settlement blocs and in East Jerusalem, has apparently shocked the foreign ministries and the leaders in London and Paris. Not only do Britain and France view construction in E1 as a “red line,” they are reportedly angry because they view Israel as having responded ungratefully to the support the two countries gave it during the recent Gaza operation.

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“London is furious about the E1 decision,” a European diplomat told Haaretz.

According to three senior diplomats from various EU countries, Britain and France were coordinating their moves against Israel, which they will reportedly implement over the next few days, and have discussed the extraordinary step of recalling their ambassadors from Tel Aviv for consultations. This step has never been taken before by these countries toward Israel. It would be so extreme that Britain and France may not take such action at this point but, rather, could invoke it in the case of further escalation of Israeli actions against the Palestinians. A final decision in the matter will be made today by the British and the French foreign ministers.

A source in the Prime Minister’s Bureau said Israel was planning more steps against the Palestinian Authority. “The Palestinians will soon realize they made a mistake in taking unilateral steps that breached agreements with Israel,” the source said.

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Netanyahu and Finance Minister Yuval Steinitz decided Sunday morning to confiscate the tax money that Israel had collected for the PA in November a total of NIS 460 million and to use it against the PA’s debt to the Israel Electric Corporation.

Britain and France are said to have informed Washington of their reported moves against Israel, as well as other European countries, including Germany.

Among the more moderate steps under consideration are suspending strategic dialogue meetings between the two countries and Israel, making a decision in each country to label consumer products that originate in the territories, and even promoting sanctions against the settlements in in EU institutions.

At this point, Germany is not expected to join a move to recall its ambassador from Tel Aviv, but it might join more moderate steps. Netanyahu will be in Berlin Thursday for a periodic bilateral summit. According to a German diplomat, Netanyahu is expected to hear sharp opposition from Chancellor Angela Merkel over punitive steps against the Palestinians by Israel, especially construction in E1.

The EU is putting heavy pressure on Israel to retract its decision to move ahead on construction in E1. Five senior European ambassadors have lodged very sharply worded protests with the Foreign Ministry and the Prime Minister’s Office in Jerusalem since Friday evening.

A senior European diplomat said that Friday evening, shortly after the government’s decision was announced, British Ambassador Matthew Gould and French Ambassador Christophe Bigot called Foreign Ministry director general Rafi Barak and held what was described as a “very tough” conversation. The British and French ambassadors told Barak they were calling on Israel to rescind its decision on construction in E1.

Dutch Ambassador Caspar Veldkamp, EU Ambassador Andrew Standley, and the German deputy ambassador called the Foreign Ministry yesterday morning. The Dutch ambassador, whose country abstained in Thursday’s UN vote on Palestinian nonmember-state status, told Barak that if the E1 construction went forward, his country could not support Israel in future UN votes. The German deputy ambassador conveyed a similar message.

Standley asked officials in the Prime Minister’s Bureau for clarifications about the decision to speed up construction in the settlements.

Netanyahu spoke out harshly against the PA at Sunday’s cabinet meeting, claiming it “was waging a struggle against the very existence of the State of Israel.”

The cabinet voted unanimously Sunday to reject the UN General Assembly resolution recognizing Palestine as a nonmember observer state. The cabinet decision described the West Bank as “disputed territory” over which “the Jewish people has a natural right and territorial claims.” At the start of the meeting, Netanyahu compared last week’s UN resolution with that body’s 1975 resolution equating Zionism with racism.

Netanyahu read out a cabinet decision in response to the 1975 resolution in which Prime Minister Yitzhak Rabin said Israel would expedite construction in the settlements in response to the resolution.

