Mélenchon Plans Central Bank Debt Cancellation, Critics Warn

Jean-Luc Mélenchon, leader of La France Insoumise, has revived a call to cancel about 18% of France’s public debt by erasing the Bank of France’s holdings on the Eurosystem, a move he argues would free fiscal space for greater public spending. The roughly €600 billion target has drawn support from investment banker Matthieu Pigasse, who contends debt cancellation could occur without economic shock, while critics insist such a move is illegal under EU treaties and would undermine financial trust. Top government officials, including Prime Minister Sébastien Lecornu and Economy Minister Roland Lescure, have dismissed the idea as fraud or nonsense and warned it could trigger a market crisis by signaling that France might not honor its obligations. Economists such as Olivier Blanchard caution that canceling central-bank-held debt could have a neutral effect on net finances but would damage confidence and set a dangerous precedent, a view echoed by ECB policymakers. France’s debt stands above 116% of GDP with large refinancing needs, and lawmakers say entertaining the plan could spook investors even as polls show Mélenchon as a potential runoff contender against Marine Le Pen; overall, the proposal is unlikely to be adopted given legal prohibitions and market risks.