Jean-Luc Mélenchon proposes French debt cancellation plan

French far-left leader Jean-Luc Mélenchon has proposed a plan to cancel a portion of France’s national debt, specifically targeting debt held by the Bank of France. Mélenchon suggested that the European Central Bank (ECB) should freeze government debt incurred during the Covid-19 pandemic to create fiscal space for social spending. This proposal comes as France’s debt burden exceeds 116% of its economic output.

European Central Bank President Christine Lagarde has rejected the proposal, labeling it “financially dangerous” and a “large waste of time.” Lagarde noted that such a move would be legally impossible under Article 123 of the Treaty on the Functioning of the European Union, which she described as a “pillar of stability.” She warned that if creditors were to face such a move, they would likely punish the country by significantly increasing interest rates on future financing.

Economists have also raised concerns, noting that while debt relief was discussed during the height of the pandemic, current inflationary pressures make such a measure risky, as it could potentially worsen economic instability.