EU diplomat: "This time ... real action taken against Israel" JERUSALEM, Dec. 3 (UPI) -- Britain and France are poised to recall their Israeli envoys to protest Israel's decision to add settlements in a contentious West Bank area, Haaretz reported. "This time it won't just be a condemnation, there will be real action taken against Israel," a senior European diplomat told the Israeli newspaper. Israeli Prime Minister Binyamin Netanyahu's decision to allow a development that would separate the West Bank cities of Ramallah and Bethlehem from Jerusalem could prevent the creation of a viable, contiguous Palestinian state, The New York Times reported. The development of the mostly empty area known as E1 was announced Friday, a day after the U.N. General Assembly voted overwhelmingly to upgrade the status of the Palestinian territories of the West Bank and Gaza Strip to the same rank as the Catholic Church's Holy See. Israeli officials also authorized construction of 3,000 housing units in parts of East Jerusalem and the West Bank. The E1 settlement would put housing along a 4-mile stretch between Jerusalem to the large settlement city of Maale Adumim, the site of the biblical Good Samaritan parable in the Book of Luke. "London is furious about the E1 decision," a European diplomat told Haaretz. Britain and France intend to implement their coordinated diplomatic moves against Israel in the next few days and were prepared to take the unprecedented step of recalling their ambassadors from Tel Aviv for consultations, three senior European Union diplomats told the newspaper. A decision on how extreme the diplomatic moves will be was to be made Monday, the newspaper said. Other options under consideration include suspending strategic dialogue meetings with Israel, labeling consumer products that originate in the Palestinian territories and promoting sanctions against the settlements, Haaretz said. Britain abstained in the General Assembly resolution on the Palestinian upgrade to non-member U.N. "observer state" status. France voted in favor of the resolution. Paris said its vote was a vote in favor of a two-state solution -- a solution Washington also favors, although the United States voted against the resolution. The two-state solution refers to the envisioned establishment of an independent Palestinian state alongside Israel. London and Paris informed Washington, as well as Berlin and other European powers, of their plans. None of the countries involved, nor the Palestinian Authority, which governs the West Bank and Gaza Strip, had any immediate comment on the report. A source close to Netanyahu's office told Haaretz Israel planned additional steps against the PA. "The Palestinians will soon realize they made a mistake in taking unilateral steps that breached agreements with Israel," the source said. Netanyahu and Finance Minister Yuval Steinitz decided Sunday to seize $121 million in tax money Israel collected for the PA in November and to use it against the PA's debt to Israel Electric Corp., Steinitz told Israel Radio. A PA spokeswoman declined to comment, saying Palestinian officials had not been officially notified of the move. The PA owes more than $181 million to Israel's main electrical power supplier.