Israel's main labour federation ordered workers to return to Ben Gurion airport but said banks would stay shut [EPA]

Israel's banks, ports and stock market have remained closed for a second day as half a million workers continued a general strike while the government and the country's main labour union held talks on the status of contract workers.

The government and the Histadrut labour federation - the umbrella organisation for hundreds of thousands of public sector workers - negotiated into the early hours of Thursday morning and were close to an agreement, Israeli media reported. 

Histadrut said that the strike, which the government estimates is costing the economy $500 million a day, would also halt trains and close the Bank of Israel and government offices.

Though the country's main Ben Gurion International Airport was shut for an hour and a half, Histadrut ordered workers there to return.

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 could take on that many new workers but has offered to improve their conditions by raising salaries by at least 20 per cent and giving them more holiday.

A labour court judge gave the two sides until early on Thursday to settle the dispute.

On Wednesday, Histadrut officials and private employers' representatives reached agreement in principle over improved working conditions for contract workers. The unions are now trying to seal a similar deal for the public sector.

Ofer Eini, the Histadrut head, and Yuval Steinitz, Israel's finance minister, were due to resume talks later on Thursday.

Contract workers have lower salaries, few benefits and can be fired without notice. The issue of contract workers has been simmering for months, with Histadrut staging a four-hour general strike over the same disagreement in November.