Lior Mizrahi, Pool, Associated Press
RAMALLAH, West Bank — The Palestinian president returned triumphantly to the West Bank on Sunday, receiving a boisterous welcome from thousands of cheering supporters at a rally celebrating his people's new acceptance to the United Nations.
An Israeli decision to cut off a cash transfer to the financially troubled Palestinian Authority, following an earlier decision to build thousands of new homes in Jewish settlements, failed to put a damper on the celebrations.
But Palestinian officials acknowledged they were undecided on what to do with their newfound status, and were waiting for upcoming Israeli elections and new ideas from President Barack Obama before deciding how to proceed.
Outside the headquarters of President Mahmoud Abbas in the West Bank city of Ramallah, some 5,000 people thronged a square, hoisted Palestinian flags and cheered their leader's return from New York. Large posters of the Palestinian leader, whose popularity had plummeted in recent months, adorned nearby buildings.
"We now have a state," Abbas said to wild applause. "The world has said loudly, 'Yes to the state of Palestine.'"
The United Nations General Assembly last week overwhelmingly endorsed an independent Palestinian state in the West Bank, east Jerusalem and the Gaza Strip, territories Israel captured in the 1967 war.
The move to upgrade the Palestinians to a nonmember observer state does not change much on the ground, but it carries deep potential significance.
The vote amounted to an international endorsement of the Palestinian position on future border arrangements with Israel and an overwhelming condemnation of Israeli settlements in the areas claimed by the Palestinians.
Israeli Prime Minister Benjamin Netanyahu rejects a return to Israel's 1967 lines. Israel remains in control in parts of the West Bank and considers east Jerusalem, the Palestinians' hoped-for capital, an integral part of its capital.
Israel also continues to restrict access to Gaza. Israel withdrew seven years ago from the coastal strip, and it is now ruled by Hamas Islamic militants who regularly fire rockets at Israel.
Israel, backed by the U.S., campaigned strongly against the statehood measure, accusing the Palestinians of trying to bypass direct peace negotiations, which it said were the only viable path to a Palestinian state.
The Israeli lobbying efforts failed miserably. Just eight other countries voted with Israel, and even its closest allies in Europe, including Germany, Italy, France and Britain, either abstained or voted with the Palestinians.
Israel responded strongly and swiftly. The following day, it said it would start drawing up plans to build thousands of settlement homes, including the first-ever development on a crucial corridor east of Jerusalem.
Although the project is likely years away, if it happens at all, the announcement struck a defiant tone.
Building in the area, known as E1, would sever the link between the West Bank and east Jerusalem, the sector of the holy city the Palestinians claim for a future capital, and cut off the northern part of the West Bank form its southern flank. The Palestinians claim such a scenario would essentially kill any hope for the creation of a viable state.
The U.S., Britain, France and other European states all denounced the plan.
On Sunday, the European Union's foreign policy chief, Catherine Ashton, expressed concern that such settlement expansion "may represent a strategic step undermining the prospects of a contiguous and viable Palestine with Jerusalem as the share capital of both it and Israel. She urged Israel to show its commitment to the early renewal of peace talks but not going ahead with the settlement plan.
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