Lagarde Slams Mélenchon 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, calling it 'financially dangerous' and legally impossible under EU law. The proposal would see the cancellation of 18% of France's debt, which is reportedly held by the Bank of France.

Mélenchon argues that this move would free up fiscal space for social spending as France's debt burden tops 116% of the country's economic output. However, Lagarde has warned that creditors would punish such a move and instead 'significantly increase the interest rate' charged on new financing.

Lagarde also pointed out that debt cancellation is barred under Article 123 of the Treaty on the Functioning of the European Union, one of the European Union's founding treaties. She described this treaty as 'a pillar of stability' and stated that any effort to circumvent debt financing rules would be a 'pure violation of the treaty'.