Israel's main labour union went on strike on Wednesday shutting airports, ports, banks and the stock market after talks with the government failed to produce an agreement on the status of contract workers.

The Histadrut labour federation, the umbrella organisation for hundreds of thousands of public sector workers, said the strike - estimated by the Treasury to cost the economy $500 million (316 million pounds) a day - would also halt trains and close the Bank of Israel and government offices.

Ben Gurion International Airport near Tel Aviv was shut for six hours, delaying many flights, while the strike for all other services was open-ended, Histadrut said.

This strike is not only unnecessary but it endangers the Israeli market, the Israeli economy and the citizens of Israel, Finance Minister Yuval Steinitz said on Israel Radio.

Histadrut chairman Ofer Eini said: The only weapon workers have is the weapon of a strike.

Treasury and Histadrut officials held talks behind closed doors, and a labour court judge gave the two sides until early Thursday to settle the dispute, leaving the door open for the strike to go into a second day.

Histadrut wants the government to hire about 250,000 contract workers, such as cleaners and security guards, whose working conditions are inferior to workers directly on government payrolls.

The Finance Ministry said it cannot take on that many new workers but has offered to improve their conditions by raising salaries by at least 20 percent and giving them more holiday.

Histadrut went on strike for the same reason last November, but on that occasion the labour court limited the action to just four hours and ordered the two sides to work out a deal.

(Reporting by Steven Scheer, Ari Rabinovitch and Allyn Fisher-Ilan; Editing by Janet Lawrence)