Germany called on Monday for a financial rescue to be ready for Greece by a May 19 debt deadline after uncertainty over the terms and implementation of the aid package pushed Athens' borrowing costs up to a 12-year high.

Greece's efforts to reassure investors that aid would arrive in time to avert the euro zone's first sovereign debt default proved unconvincing, and there were signs a 45 billion euro ($60.49 billion) EU-IMF aid package would have to be bigger.

The premium investors demand to buy Greek government bonds rather than euro zone benchmark Bunds hit a 12-year high, Greek bank stocks dropped and the euro fell.

The market wants to see the cash laying on the table, not in a coffer beside the table, said David Schnautz, strategist at Commerzbank in Frankfurt.

German Finance Minister Wolfgang Schaeuble sought to ease investors' concerns by saying Berlin aimed to free up financial support for Greece before May 19, when Athens has to refinance an 8.5 billion euro bond.

I reported Greece's needs to the parliamentary leaders and requested that we arrange the parliamentary debate and decision process so that we are in a position -- like the others -- to make the necessary loans available to Greece before May 19, if needed, he said.

Germany may be able to finalize a law granting Greece financial aid on May 7, and cautioned that any failure by Athens to refinance the euro bond on May 19 would have unforeseeable consequences, Schaeuble added.

He spoke shortly before Chancellor Angela Merkel, who was due to make a statement on Greece at 1300 GMT.

The backing of Germany, Europe's biggest economy, is vital for any aid but Berlin faces public opposition to a financial rescue and is taking a tough line over the terms.

In a possible complication, Germany's opposition Social Democrats said they would not back an accelerated parliamentary process to approve aid for Greece.

GREEK PROTESTS

Saddled with huge debt and a swollen deficit, Greece bowed to pressure from markets on Friday and formally requested aid, triggering what could be the first financial rescue of a member of the 11-year-old currency bloc.

Athens is in talks with the EU and IMF on additional steps to get the aid flowing in time to meet the May 19 debt deadline.

Athens has already announced billions of euros in budget cuts, including tax hikes and reductions in public sector wages, setting off violent protests and strikes.

Dockers at Greece's largest ports stopped work on Monday to protest against moves to allow non-Greek cruise ships to moor at multiple Greek ports without hiring Greek crews.

Lifting the restrictions, as announced, will mean the end of Greek-flagged cruise shipping and the funeral of Greek sailors, said Antonis Dalakogiorgos, head of the Panhellenic Sailors' Union.

But financial markets sent a warning over any failure to contain Greece's debt problems, pushing up the cost of insuring Portuguese government debt against default to a record high because of fears Lisbon could be next to suffer a debt crisis.

The Greek crisis has started to spread to the rest of the periphery and Portugal seems to be next in line. The situation there is less urgent than in Greece, but the medium-term outlook is challenging, said Darren Williams, senior economist at Alliance Bernstein.

Unless Europe's leaders can draw a line under the situation, Portugal could face an uncomfortable period.

Underlining the fears of contagion to other heavily indebted members of the 16-country euro zone, and also concerns about the damage the crisis could do to the EU's standing, Austria called for a quick decision on triggering aid.

This aid, which is urgently needed, needs to be effective. We should waste no time here, the basic decisions have been made, Foreign Minister Michael Spindelegger said.

TALKS ON AID PROGRESS

Greek Finance Minister George Papaconstantinou said on Sunday talks on the aid had gone well and he was confident Athens would secure help in May to finance its public debt.

Papaconstantinou also played down concerns that the German government, which wants to avoid defeat in an important regional election on May 9, might block the rescue deal.

Canadian Finance Minister Jim Flaherty said the package would end up being more than had been said previously. Asked whether aid could be as much as 80 or 90 billion euros, Papaconstantinou said he could not provide specific figures.

An EU-IMF support package of 45 billion euros would only fill liquidity needs of the first year. A multi-year package of 90 billion euros could provide Greece the breathing space to implement the fiscal adjustment, Barclays Capital said.

The Greek/German 10-year bond yield spread climbed to 679 basis points, up from Friday's settlement close of 588 bps, matching levels last seen in February 1998.

Spreads against Bunds widened across the euro zone periphery, with the Italian spread moving to 99 bps, its widest since July 2009.

Greece needs 30-40 billion (euros) this year. They need the same amount for each of the following two years. The aid is very much a stop-gap and it's far from certain that everyone is going to support it, said Nigel Rendell, an emerging markets strategist at RBC.

(Additional reporting by George Georgiopoulos, Renee MaLtezou and Ingrid Melander in Athens; Ilona Wissenbach in Luxembourg and Emelia Sithole-Matarise in London; writing by Timothy Heritage, editing by Toby Chopra/Susan Fenton)

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