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Israel announced Wednesday that it would release $100 million in tax funds owed to the Palestinian Authority, ending a standoff that the Palestinians say has caused grave damage to their fragile economy.

The move followed heavy pressure from the United States, United Nations and Europe on Israel to free the money. Israel collects the tax funds for the Palestinians and transfers the money each month, in accordance with partial peace agreements from the 1990s.

The forum of eight senior ministers Wednesday decided on the handover, despite the vehement objection of Foreign Minister Avigdor Lieberman.

The ministers' forum ruled that Israel would transfer the withheld October tax funds, as well as refrain from delaying taxes collected for the month of November.

A senior Israeli official said the cabinet would consider freezing tax collection funds in the future if the Palestinians continued unilateral attempts for recognition at the United Nations or in the case of the formation of a unity cabinet between Fatah and Hamas.

Lieberman, who voted against the transfer, said "Israel should have explained the decision [to withhold the money] clearly to the international community, instead of allowing pressure to lead to a mistaken decision."

The foreign minister has been claiming over the past two weeks that Palestinian Authority President Mahmoud Abbas will likely use the money to give grants to 450 terrorists released in the Gilad Shalit prisoner swap deal, instead of using the funds to pay the salaries of members of the Palestinian security forces.

Israel froze this month's transfer of October's tax money to punish the Palestinians for their efforts to win UN recognition of their independence. The Israeli decision came after the Palestinians were accepted to the UN cultural agency UNESCO - part of a broader effort for admission as a full member state at the United Nations.

The tax funds from customs duties and other fees are needed by the Palestinian government, the largest single employer in the Palestinian territories, to pay tens of thousands of workers, as well as security forces, which have won praise for their cooperation in halting militant attacks on Israelis.