France's Presidential Hopeful Touts Debt Cancellation as Fiscal Fix

France's presidential election has brought national debt to the forefront of discussions among candidates. Unlike in the US, French presidential hopefuls have focused on tackling the country's massive public debt. One candidate, far-left leader Jean-Luc Melenchon, proposes a simple solution: canceling France's national debt held by the central bank.

Melenchon claims that if the Bank of France cancels its 18% holdings of French debt, the government could then spend more on social programs. The plan has gained popularity among voters, with Melenchon poised to face off against far-right leader Marine Le Pen in the next presidential election.

However, not everyone agrees that canceling national debt is a viable solution. France's prime minister warned that reneging on the national debt would force the country to borrow at exorbitant interest rates. The head of Germany's central bank also stated that Melenchon's plan would be forbidden under the eurozone's rules and could lead to hyperinflation.

The yield on French 10-year bonds has risen, nearing the highest spread since Europe's debt crisis in 2012. Investors are growing increasingly nervous about French debt, with some warning that a decisive top of 90 basis points in the spread between French and German 10-year yields could indicate long-term fiscal challenges.