Lagarde Rejects Mélenchon's Debt Cancellation Plan
ECB President Christine Lagarde rejected French far-left leader Jean-Luc Mélenchon's proposal to cancel 18% of France's national debt, calling it 'financially dangerous' and 'legally impossible' under EU law. Mélenchon had argued that cancelling the debt would free up fiscal space for social spending as France's debt burden tops 116% of its economic output.
Lagarde compared public debt to a personal loan, stating that if a borrower refuses to repay and then seeks new financing, 'I'm not going to finance you.' She also mentioned that she would 'significantly increase the interest rate' charged. Lagarde emphasized that creditors would punish such a move.
The ECB President pointed out that debt cancellation is barred under Article 123 of the Treaty on the Functioning of the European Union, calling it 'a pillar of stability.' She stated that any effort to circumvent debt financing rules 'would be a pure violation of the treaty.'