UPDATE 1-Israel public sector strike ends

* Union and government reach deal on contract workers

* Banks, stock market, municipalities to reopen (Adds end of strike)

JERUSALEM Feb 12 (Reuters) - An Israeli public sector strike that has disrupted public transportation and closed banks, the stock market and government offices ended on Sunday with a new wage package for low-earning contract workers.

The Finance Ministry announced the deal with the Histadrut labour federation, which declared the strike that began on Wednesday was over.

The Histadrut had demanded the government hire 250,000 contract workers, such as cleaners and security guards, whose conditions are inferior to those directly on government payrolls.

Under the deal, those workers will not be hired by the state. Instead, they will get pay rises, be eligible for merit bonuses and their pension plans will be improved, according to the ministry statement. (Writing by Jeffrey Heller, Editing by Ari Rabinovitch)