ECB chief Christine Lagarde rejects Mélenchon's debt cancellation proposal
Article 123 of the EU treaty prohibits the ECB from cancelling government debt that it has purchased.
European Central Bank President Christine Lagarde dismissed a proposal by left-wing French presidential candidate Jean-Luc Mélenchon to cancel the country's debt held by the central bank on Thursday. During a press conference following the ECB's announcement of another interest rate hike, Lagarde called the proposal "not a good idea" and said it would be a "clear violation of the treaty" on the European Union.
Mélenchon's plan would involve canceling 18% of France's debt currently held by the central bank, a proposal he first floated during the COVID-19 pandemic and revived on the campaign trail. The idea has already drawn criticism in France, with Nobel Prize-winning economist Philippe Aghion describing it as "catastrophic" and Prime Minister Sébastien Lecornu saying it would "destroy France's most important asset", namely "trust".
Mélenchon initially proposed the debt cancellation during his 2022 presidential campaign and revived it in August, suggesting a simple solution of taking the debt securities to the central bank and burning them. France is set to hold its presidential election in April next year, with recent polls showing Mélenchon in a strong position to advance to a second round, with around 16% support, up from 12% in April.
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