Germany's troubled construction sector claimed another victim yesterday when Walter Bau, the industry's fourth-largest building player, filed for insolvency.

The company said the move was its last chance to preserve parts of the company and the jobs of its nearly 10,000 employees.

The company's 27 creditor banks declined to provide further funding yesterday after weeks of desperate negotiations to plug an estimated €250 million hole in its books.

"As a result, there is no provision for the necessary short-term liquidity," the company said in a statement, adding that its subsidiaries are expected to continue operating as normal for the foreseeable future.

But a spokesman for IG Bau construction union doubted that claim.

"It would be an illusion to say that only the mother company will be affected," said Mr Karl Heinz Strobl, an IG Bau union leader.

Germany's construction sector has been in the doldrums for a decade following a post-reunification spike. The German Construction Federation predicts a 3.5 per cent drop in turnover for 2005 to €76 billion and a loss of 40,000 jobs in the industry.

Yesterday government ministers expressed regret but made no suggestions of a bailout. It couldn't be a more different reaction to 1998, when Chancellor Schröder personally intervened to put together a €96 million rescue package for Philip Holzmann AG, then Germany's largest and oldest construction company.

Two years later the company went bankrupt anyway.