JERUSALEM (Reuters) - Israel said on Monday it would restart regular monthly tax transfers to the Palestinian Authority, restoring vital funding days after U.S. President Barack Obama called for confidence-building steps toward peace.
Israel began withholding the money - about $100 million (65.8 million pounds) in tax revenues it collects each month on behalf of the Authority - in November after President Mahmoud Abbas secured de facto U.N. recognition of Palestinian statehood.
The cut-off was a blow to Abbas who urgently needed the cash to pay public sector salaries at a time of growing financial strain. Officials had warned of possible unrest in the Israeli-occupied West Bank if wage arrears were not covered.
Under international pressure, Israel made a transfer in January and again in February, but said at the time decisions on whether to continue would be made on a month-by-month basis.
Israeli Prime Minister Benjamin Netanyahu's office on Monday said he had instructed Finance Minister Yair Lapid "to resume the transfers". A spokesman for Netanyahu said that meant regular monthly payments would be made from now on.
Obama made a three-day visit to Israel and the occupied West Bank last week and called for a resumption of peace negotiations that have been stalled since 2010.
The U.S. President said he wanted to see "steps that both Palestinians and Israelis can take to build trust and confidence upon which lasting peace will depend".
Palestinians seek a state in the Gaza Strip and the West Bank with Arab East Jerusalem as its capital - territories Israel captured in the 1967 Arab-Israeli War.
Talks have stalled over the issue of Israel's continued building of settlements for its citizens in the occupied West Bank.
Abbas's Palestinian Authority exercises limited self rule in the West Bank under interim peace deals.
(Reporting by Jeffrey Heller; Editing by Andrew Heavens)