Despite the frenzy of diplomacy surrounding the Palestinian bid for statehood at the United Nations headquarters this week, it was still unclear on Wednesday what would happen.

An Israeli offer to renew talks, in which Prime Minister Benjamin Netanyahu agreed to postpone his demand that the Palestinians recognise Israel as a Jewish state, was turned down by the Palestinians since it did not include an Israeli commitment to "freeze" settlement building in the West Bank.

At the time of going to press, Palestinian President Mahmoud Abbas was subject to strong diplomatic pressure from the US and EU to scale back or delay the Palestinian demands for a Security Council vote.

However, it remained unclear what both sides intend to do after the leaders return home from the UN General Assembly.

Mr Abbas's aides said that he plans to convene the Palestinian leadership in Ramallah after his return from the UN headquarters this weekend and that he "may announce a drastic new policy". While some Palestinian sources have hinted that this may mean an end to the Oslo Accords, others have tried to play down the significance of any announcement saying: "Abbas will not want to lose face to Hamas by admitting that going to the UN has got the Palestinians nowhere." Meanwhile, the Israeli government appeared unable to agree on a strategy for the day after the UN vote.

Netanyahu agreed to delay demand for recognition of Israel as Jewish state

Defence Minister Ehud Barak has advised that, for now, Israel should not change anything in its policy on the ground and not jeopardise its security co-ordination with the Palestinian Authority.

On the other hand, right-wing elements within the coalition have advocated various sanctions.

Finance Minister Yuval Steinitz has said publicly that he would favour cutting off the transfers of tax money that Israel charges on behalf of the Palestinians.

The US State Department has urged Israel not to pursue such a path, which would lead to the collapse of the PA.

Others have called for Israel to cancel the Oslo Accords, and even to extend its sovereignty to parts of the West Bank.

Reports in the Israeli media quoted Foreign Minister Avigdor Lieberman as threatening a "coalition crisis" if the government does not "punish" the Palestinians following the vote.

While Deputy Foreign Minister Danny Ayalon confirmed that their party, Yisrael Beiteinu, would be demanding action against the PA, including announcing Israeli sovereignty over the settlement blocs, Mr Lieberman himself took to the airwaves on Wednesday morning to deny that such threats had been made.