Lagarde Rejects Mélenchon's Debt Cancellation Plan as 'Financially Dangerous'

European Central Bank President Christine Lagarde has rejected French far-left leader Jean-Luc Mélenchon's plan to cancel a portion of France's national debt. Mélenchon proposed cancelling 18% of France's debt, arguing that it would free up fiscal space for social spending as the country's debt burden tops 116% of its economic output.

Lagarde compared public debt to a personal loan and said if a borrower refused to repay and then sought new financing, she wouldn't finance them. She would instead 'significantly increase the interest rate' charged. Lagarde called the plan 'financially dangerous' and legally impossible under EU law.

The European Central Bank President also cited Article 123 of the Treaty on the Functioning of the European Union as a reason why debt cancellation is barred. The treaty, she said, is 'a pillar of stability'. Mélenchon's proposal would be a 'pure violation' of this treaty, Lagarde stated.

Lagarde made these comments at the ECB's regular press conference after raising interest rates on Thursday, September 10.