ECB says has tools to calm markets as French debt worries rise

European Central Bank chief Christine Lagarde, set to resign early in February 2027, assured investors that policymakers would intervene if necessary to stabilize markets. The ECB reaffirmed its crisis-fighting tools are available to address disorderly market movements, particularly in response to France's deteriorating public finances, which have driven up borrowing costs.

Lagarde's remarks, made during a meeting shortly after her announcement of her impending departure, aimed to allay concerns that France's worsening financial situation could destabilize the broader eurozone. Despite rising inflation fueled by the Iran war and energy shock, the bank decided to keep its benchmark interest rate unchanged.

However, it signaled a potential rate hike in December, citing tighter financing conditions due to surging bond yields. While Lagarde did not directly comment on France's debt issues, she emphasized that the ECB has the authority to act if market conditions warrant it, subject to strict criteria. France's borrowing costs have spiked due to political unrest over budget proposals and budgetary reforms, leading to the most violent protests in years.

The ECB's decision to hold rates steady, following two previous hikes, reflects ongoing concerns about the economic impact of the energy crisis, although core inflation remains under control. Lagarde's departure creates a window for European leaders to choose her successor before France's presidential elections, potentially influencing the political landscape.