The risk associated with French bonds has reached its highest level since the euro area debt crisis due to a political standoff over the national budget. This standoff poses a threat to the stability of the current government.

The premium that investors require to hold 10-year French government bonds over their German counterparts has significantly increased, closing above 86 basis points on Tuesday. This is the highest level seen since 2012. Analysts from Citigroup Inc. have suggested that if the government were to collapse, this premium could rise even further, potentially reaching 100 basis points, or 1 percentage point. This situation reflects growing investor concerns about France's fiscal management and political stability, particularly in the midst of ongoing budget negotiations.