Israel has not only "punished" the Palestinians for seeking and achieving an upgrade of UN status, it has also slapped the face of the UK and of Germany, both of whom withheld support for the Palestinians in the vote.
Prime Minister Benjamin Netanyahu's decision to give the go-ahead for some 3,000 new homes in the occupied territories may be part of long-held plans to cut off East Jerusalem from the rest of the Palestinian territories, killing off hopes of a separate state with a capital in Jerusalem. Alternatively, it may be another move in Israel's old game of suggesting the worst and then demanding favours for restraint. In either case, it cannot go unchallenged.
Thus far, Britain, France and Sweden have indicated their anger by calling in the Israeli ambassadors. Germany, unusually supportive, has publicly condemned Israel's action. But although this may be strong stuff in diplomatic circles, in practical terms it means very little unless it is accompanied by actions.
Mr Netanyahu has thrown down the gauntlet, declaring on Sunday that "we will carry on building in Jerusalem and in all the places that are on the map of Israel's strategic interests". If that is really his policy, then he is knowingly and deliberately crushing any hope of a negotiated two-state solution to the world's longest-running and most destructive dispute.
The Foreign Office says that it is considering further action if Israel does not withdraw its measures. Recalling our ambassador from Israel, as early rumours suggested might be the case, is self-defeating. This is a case where Europe should and could act as a whole. For starters, we could ban the import of any products from the settlements and insist on labelling of origin as a precondition of any import. We could also decide to rescind the "association agreement" recently signed with Israel giving it considerable trading advantages.
For too long Europe has looked to the US to do the arm-twisting on Israel. It is time that we showed some grit of our own.