Overview
- Christine Lagarde publicly rejected Jean‑Luc Mélenchon’s proposal at an ECB press conference in Berlin on Thursday, calling it barred by Article 123 of the Treaty on the Functioning of the EU and “financially dangerous.”
- Mélenchon has proposed wiping out about 18% of France’s debt that he says is held on the central bank’s books, a slice equal to roughly €600–€636 billion against a total public debt near €3.5 trillion or about 117.5% of GDP.
- Article 123 bans monetary financing, which means the ECB and national central banks cannot directly fund government budgets by cancelling or underwriting debt holdings.
- Lagarde warned creditors would punish any cancellation by demanding higher interest rates, a response that would push up France’s borrowing costs and could widen spreads across the euro area.
- She also used the briefing to dismiss fresh speculation that she will leave the ECB early, underscoring the institution’s legal role and the broader euro‑area consequences of any move to erase central‑bank holdings of sovereign debt.