Palestinian Prime Minister Salaam Fayyad is calling on his people to boycott Israeli products. Fayyad told reporters Sunday the boycott is in protest of Israel's withholding of funds to the cash-strapped Palestinian Authority.

According to the Ma'an News Agency, Fayyad said the boycott should apply to all Israeli products, not just those made in Israeli settlements.

Israel is holding 100 million dollars in taxes it normally transfers to the Palestinians. It cut off the funds after the Palestinians won upgraded recognition at the United Nations last month. Israel says the move undermines negotiations.

The Palestinian Authority uses the money to pay salaries to its tens of thousands of civil servants and security forces. Israel says it is using the money to pay down debts owed to Israel.

Israeli Foreign Ministry spokesman Yigal Palmor said the Palestinians should "concentrate efforts on how to build their own economy, not how to boycott someone else's."

Earlier this month, Prime Minister Benjamin Netanyahu and Finance Minister Yuval Steinitz decided to confiscate the tax revenues that Israel collected for the Palestinian Authority during the month of November, and use it to offset the PA's debt to Israel's Electric Corporation.

The move comes in response to the upgrade of Palestine at the United Nations to non-member observer state, following a vote of 138 to 9. Following the upgrade, Israel announced that it intends on building 3,000 new homes in settlements in East Jerusalem and the West Bank.

The confiscation of funds, which total NIS 460 million and are intended for the salaries of PA officials, came after Israel warned of the move ahead of the UN vote. On November 11, Steinitz warned: "If the Palestinians continue to advance their unilateral move they should not expect bilateral cooperation. We will not collect their taxes for them and we will not transfer their tax revenues."

As far back as two years ago, President Mahmoud Abbas swung behind a campaign to stop Palestinians buying goods produced by Israeli settlements in the West Bank, urging all Palestinians to shun the products.

Abbas dismissed Israeli accusations that the campaign amounted to incitement of hatred against Israel - something the United States has urged him to prevent as it mediates indirect peace talks between the sides.