French stocks and bonds came under fire on Wednesday, driving the premium the government pays for long-term borrowing to its highest since the euro zone debt crisis of 2012, as investors grew uneasy over the fate of the new government and its budget.

French Prime Minister Michel Barnier said the country faces a “storm” in financial markets if an “unlikely but possible” alliance of lawmakers across the political spectrum rejects his government’s budget proposals and votes it out of power.

The future for French Prime Minister Michel Barnier's government looks bleak, with his struggles to push the 2025 budget through a polarised parliament increasingly likely to end in the toppling of his fragile coalition.