While French bond spreads have compressed modestly overnight (as French Finance Minister Antoine Armand announced that he is ready to amend the 2025 budget proposal to avoid a government collapse), they remain extremely elevated (at their highest since the European financial crisis in 2012) as rising tensions threaten the country's economic stability.

As Remix News reports, Armand, warned before the upcoming budget debate that the government must make compromises regarding the 2025 budget proposal. The political situation is constantly deteriorating, because the opposition parties in the National Assembly, led by Marine Le Pen of the National Rally, have called for a no-confidence vote if the government does not accept amendments that make a tangible difference to the proposed tax increases.

Armand made headlines in September for asserting that the National Rally party was not a party he would deal with, as it was not part of what he called "the republican arc," instigating French Prime Minister Michel Barnier to even phone Le Pen to apologize for the comment.

Le Pen, meanwhile, has insisted her budget demands have been long cast aside. 

The budget crisis may have serious consequences for the French economy, with market investors reacting with increased concern, as a result of which the yields on the French bond market have risen. 

Armand has said that the government should avoid unnecessary risk and that the adoption of the budget is now vital for the future of the country.

The discussion of the budget proposal will continue in the National Assembly on Dec. 18, with the outcome of the new amendments still unclear. Armand stated that the government is open to remedying the situation by cutting spending instead of implementing the planned tax increases.

Le Pen has called on the government to institute some €60 billion of adjustments, including a tax moratorium, indexed pensions, and more action to counter migration.