Lagarde Rejects Mélenchon's Debt-Cancellation Plan, Citing EU Law

European Central Bank President Christine Lagarde has rejected French far-left leader Jean-Luc Mélenchon's plan to cancel part of France's national debt. The proposal, which would wipe out 18% of the country's debt, held by the Bank of France, is deemed 'financially dangerous' and illegal under EU law. Mélenchon argues that the move would free up fiscal space for social spending as France's debt burden tops 116% of the country's economic output.

Lagarde compared public debt to a personal loan, stating that if a borrower refused to repay and sought new financing, 'I'm not going to finance you,' instead increasing interest rates. She also cited Article 123 of the Treaty on the Functioning of the European Union, which bars debt cancellation, calling it 'a pillar of stability'.

The rejection comes after Mélenchon proposed the plan as a way to address France's economic woes, but Lagarde emphasized that such an effort would be a 'pure violation of the treaty'. The ECB president's stance aligns with her previous views on debt financing rules, which she considers essential for maintaining financial stability in the euro area.