The cost of insuring Greece's debt against default hit a record high and its borrowing costs soared on Tuesday after Germany's junior coalition party said Berlin was not certain to put its weight behind a financial rescue.

Prospects of Greece not securing aid in time to meet a debt deadline on May 19 also stoked fears that other euro zone states might face similar problems, pushing the cost of insuring Portuguese government debt to a new high.

Market pressure on Greece has intensified since it asked for emergency help on Friday. It is now in talks with the European Union, International Monetary Fund and European Central Bank on the terms of the 45 billion euro ($60.5 billion) aid package.

Chancellor Angela Merkel said on Monday Germany was willing to help Greece if it showed a readiness to enact new savings and put its economy back on a sustainable path, prompting calls on Tuesday for more belt-tightening from the head of the Greece's central bank.

But the budget spokesman for Merkel's Christian Democrats (CDU) said on Tuesday the party would raise the issue of forcing investors to take a discount on Greece debt in talks with the IMF and ECB.

Norbert Barthle said banks that had profited from holding Greek government debt should be made to contribute to any rescue by taking a discount, or haircut, on the value of that debt.

Barthle's peer in Germany's junior coalition partner, the Free Democrats (FDP), said a contribution to the rescue from Berlin was not yet guaranteed.

One may have to say no if Greece does not meet conditions and the country just comes along to get money under more favorable terms from the euro zone than from banks, Juergen Koppelin said.

The backing of Germany, Europe's biggest economy, is vital for any rescue but Merkel believes her party is vulnerable to losing a regional election on May 9, depriving her coalition government of its majority in the upper house of parliament.

She wants to reassure financial markets and protect the euro but is also taking a tough line on the terms of the deal because of German public resistance to aid for Greece, and this has heightened investor uncertainty.

The German stance on financial aid for Greece and the conditions they attach to it create uncertainty, said Nikos Galoussis, Athens-based analyst at Kappa Securities.

CREDIBILITY PROBLEM

The head of Greece's central bank sought to address Athens' credibility problem by suggesting it try to reduce its budget deficit by 5 percentage points of GDP or more this year, above current plans.

The government has so far proposed cutting four percentage points off the budget deficit, which was revised upwards to 13.6 percent of gross domestic product for last year by EU statistics agency Eurostat this month.

In order to bring about a definitive reversal of the negative trends, we must surpass ourselves and favorably surprise markets, by achieving even greater improvements than the ones projected, bank governor George Provopoulos said in a report.

But many Greeks already fear austerity measures tied to the funding will hit living standards and raise tensions in a country prone to protests, and this has increased pressure on Greek Prime Minister George Papandreou's government.

The first opinion poll taken since Athens requested aid showed on Tuesday a majority of Greeks disapprove of the government's decision to ask for financial aid.

Of 1,400 people surveyed, 60.9 percent said they were against the government's decision, according to the poll by Greek Public Opinion (GPO) for Mega TV. [nLDE63P2IV]

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

CONCERNS GROWING

The aid is the largest bailout ever attempted and the first for a euro zone member, but concern is growing that Greece will not be able to refinance an 8.5 billion euro bond on May 19.

If Greece defaulted, it would be the first member of the euro zone to do so since the 16-country currency bloc was created 11 years ago.

ECB Vice-President Lucas Papademos said the aid package must tackle the root causes of Greece's economic weaknesses.

It is essential that the economic program ... will address the root causes of Greece's fiscal imbalances and structural weaknesses so as to ensure the sustainability of its public finances and improve the country's international competitiveness, Papademos said in the European parliament.

On the markets, Greek banks stocks tumbled 4 percent and the euro slid against the dollar as investors sought clarity about the aid talks.

Five-year Greek credit default swaps were at a record high of 736.3 basis points, meaning it costs 736,300 euros to insure 10 million euros worth of debt against default.

The Greek/German 10-year bond yield spread was at 689 basis points, the widest since early 1998, meaning costs for borrowing are prohibitive for Greece.

The Portuguese/German bond yield spread hit a euro lifetime high of 258 basis points.

Portuguese CDS also hit a record high earlier on Tuesday at 316.6 basis points, up from 311 on Monday. The cost of insuring Irish and Spanish debt, likewise viewed as sensitive to any worsening of Greece's debt crisis, also rose.

(Additional reporting by Athens Bureau and London markets team, and Dave Graham in Berlin; writing by Tim Heritage; editing by John Stonestreet)

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