Israel blocked the transfer on Sunday after president Abbas, L, signed a reconciliation deal with Hamas group which controls Gaza [AFP]

UN Secretary-General Ban Ki-moon has told Israeli Prime Minister Benjamin Netanyahu that Israel should not withhold tax revenues from the Palestinian Authority following its unity deal with Hamas.

In telephone talks with Netanyahu on Friday, Ban reaffirmed UN support for Palestinian unity under the leadership of Abbas and called on the Israeli prime minister to give the deal a chance to lead to an historic peace accord.

"The Secretary-General ... noted that Palestinian unity is a process which is just beginning now, and thus, it would be best to assess it as it moves forward," the UN press office said in a statement summarising Ban's telephone call with Netanyahu.

"He also urged Israel not to stop transferring tax revenues to the Palestinian Authority," it said.

Israel on Sunday blocked the transfer of $105 million in customs duties and other levies it collects on behalf of the Palestinian Authority, following a deal to reunite the two rival wings of the Palestinian independence movement.

Palestinians see reconciliation between Fatah and Hamas as crucial for their drive for an independent state in territories Israel occupied in the 1967 Arab-Israeli War. Israel has condemned the unity pact as a "tremendous blow to peace."

Ban told Netanyahu "he hoped Israel will make decisive moves towards a historic agreement with the Palestinians," said Nesirky.

"The secretary general said it was urgent to overcome the impasse in the negotiations between Israel and the Palestinians. Continued drifting will not serve the interests of both parties."

"(Ban) said he was convinced that realizing a negotiated two-state solution as soon as possible is in the best interest of both the Israeli and Palestinian people," the statement added.