The Hamas-Fatah rapprochement has hardened Israel's resolve to maintain its stranglehold on Palestinian tax money, although commentators agreed Friday the two movements were far from a true reconciliation.
Hours after Palestinian president Mahmud Abbas held top-level talks with Hamas chief Khaled Meshaal at which they announced a new era of "partnership", Israeli Prime Minister Benjamin Netanyahu convened his security cabinet to ponder a response.
At the late night meeting, ministers decided, for the time being, to maintain a freeze on the transfer of tens of millions of dollars in tax monies to the Palestinian Authority, government sources said.
The transfer of funds, which make up a large percentage of the Ramallah government's monthly budget, was frozen on November 1 as a punitive measure after the Palestinians won full membership in the UN cultural organisation.
"If the Palestinians have signed an agreement over a unity government, it would make a transfer of funds impossible," a senior government official told AFP.
Israel's main concern is that the Fatah-dominated Palestinian Authority will patch up ties with the Islamist movement, whose charter still calls for the destruction of the Jewish state, and set up a unity government in a move which the Palestinians say will only happen after elections in May.
"We have turned a major new and real page in partnership on everything to do with the Palestinian nation," Meshaal told reporters in Cairo after nearly two hours of dialogue with Abbas.
"There are no more differences between us now," said Abbas, who heads the Fatah movement. "We have agreed to work as partners with joint responsibility."
Such sentiments provoked anger in Israel, although few commentators harboured any illusion the two rival movements were any closer to ending the rift and forming a unified Palestinian front.
Signup to our newsletter and follow us on Facebook and Twitter!
"After the reconciliation and after what Abu Mazen said there’s not a chance in the world that we’ll transfer the money," Israeli sources told the top-selling Yediot Aharonot daily.
Speaking to Israel's army radio, deputy prime minister Silvan Shalom described the Cairo summit as "a negative and dangerous development."
"We will ask the international community not to talk to a government in which Hamas is an essential component when this terrorist organisation continues to call for the destruction of Israel," he said.
Despite the upbeat public statements from Abbas and Meshaal, there was little indication the two men had made any concrete progress in resolving disputes which have blocked implementation of a reconciliation agreement signed six months ago, sparking a flurry of commentary in the Israeli press.
"This was merely a tactical reconciliation rather than a genuine step, as the differences that divide both sides are still great," Yediot said.
"Despite the celebratory pronouncements, Abu Mazen and Khaled Meshaal have no compromise plan that will make real reconciliation possible. That is why in their meeting, they did not bridge their differences on any major problem," wrote Yediot commentator Alex Fishman.
The meeting had a single goal, he wrote: to reach elections in May 2012.
"Everything else is pretence. Fatah and Hamas have no common denominator or interest in reconciliation anytime soon. Nobody, not Fatah, not Hamas, not Israel and not the US, pins any hope on the reconciliation in Cairo."
Israel's decision to continue withholding the tax monies in response to the Cairo summit looked to draw more criticism from the international community. In recent days, Netanyahu's government has come under heavy pressure from UN chief Ban Ki-moon and the Middle East Quartet to release the funds which amount to an estimated $100 million a month.
Israel often freezes the transfer of funds as a punitive measure in response to diplomatic or political developments viewed as harmful.