Lagarde Rejects Melenchon's Debt Cancellation Plan: EU Treaty Breach Looms

European Central Bank (ECB) President Christine Lagarde has rejected Jean-Luc Melenchon's plan to cancel French debt owned by the central bank. The proposal, which was initially raised by Melenchon during his 2022 presidential bid, involves erasing the 18% share of France's obligations presently sitting with the Banque de France.

Lagarde characterized the idea as 'a poor one' and stated that it would represent an unmistakable breach of the European Union's founding treaty. Melenchon's plan has already faced pushback from within France, with economist Philippe Aghion calling it 'disastrous', and French Prime Minister Sebastien Lecornu arguing that it would eliminate France's greatest possession: trust.

The ECB President's comments come as the central bank revealed another hike to its benchmark interest rates. Lagarde stated that such a step would undermine confidence in the financial system and have far-reaching consequences for the entire EU economy.