Greek borrowing costs hit new highs at both ends of the lending spectrum on Tuesday, as officials readied for the start of talks on an EU/IMF bailout package whose funding needs an ECB policymaker said were not yet capped.

Ten days of talks will begin on Wednesday and address belt-tightening measures Greece will have to take until 2012, the European Commission said, while paving the way for the swift payout of up to 30 billion euros ($40.41 billion) of euro zone emergency aid if Athens asks for it.

Discussions had been due to get under way on Monday but fell victim to the ash cloud that has closed much of Europe's airspace, unnerving markets made more jittery on Tuesday by data showing Greece's unemployment rate had risen sharply and its current account deficit widened.

EU officials said Wednesday's talks, involving mid-level officials, would go ahead using videoconferencing if necessary.

Finance Minister George Papaconstantinou reiterated Greece would trigger the safety mechanism when needed, and that plans for a U.S. roadshow for a dollar bond remained unchanged.

Papaconstantinou said there was "no chance" the country would fail to cover its borrowing needs for May, after it paid a euro lifetime high of 3.65 percent earlier on Tuesday to attract buyers for 1.95 billion euros of 13-week T-bills.

"We now expect Greece to have to tap some form of external aid to get through May ... (but) until you actually get that announcement you could see spreads continue to drift," said Colin Ellis, European economist at Daiwa Capital Markets.

European Central Bank Governing Council member Axel Weber said that, over the coming years, Greece might need as much as 80 billion euros ($111.8 billion) to avoid default, sources at a political event said on Tuesday.

Weber also told lawmakers that Greece's debt situation was worsening and that "the numbers are changing all the time," the Wall Street Journal reported.

"The markets are considering more and more the prospect that not only will there be a (Greek) support package, but on top of that, debt holders will have to get some restructuring of their bonds," said Piet Lammens, strategist at KBC in Brussels.

The yield at Tuesday's T-bill auction more than doubled from 1.67 percent at the previous auction of the paper on Jan 19.

At the opposite end of the curve, the premium investors demand to buy Greek government bonds rather than euro zone benchmark Bunds also rose to a fresh euro lifetime high, widening to 483 basis points from a previous peak of 482. (One basis point is equivalent to 0.01%, or one-hundredth of a percentage point.)

By mid-afternoon the spread stood at 478 bps.

"It looks like the T-bill sale was quite successful in terms of them having raised more than they initially planned. But the borrowing cost was quite high. Greece won't be able to cover its financing needs with T-bills," said Jens-Oliver Niklasch, a bond analyst at LBBW.

IMF Chief Economist Olivier Blanchard said lending bailout funds to Greece at high interest rates would make an economic recovery impossible.

"Of course, Greece must tighten its belt to pull itself out of the trouble it got itself into," Blanchard said in an interview in Le Monde newspaper. "But lending it rescue funds at high interest rates doesn't make sense, because it would make a recovery impossible."

An ambitious austerity package designed to cut Greece's budget deficit by around a third to 8.7 percent of GDP this year was put under further pressure by statistics service data showing unemployment rose to 11.3 percent in January from 10.2 percent in December.

"Conditions in the labor market are deteriorating sharply. The stabilization observed in December seems to have been entirely due to temporary factors," said Nikos Magginas, economist at National Bank of Greece.

"Current trends suggest that the average unemployment rate will exceed 12 percent in 2010."

The Bank of Greece said the current account deficit widened to 3.52 billion euros in February, and a European Central Bank document seen by Reuters concluded the situation for Greek banks also remained difficult and could deteriorate further.