Paris – In a development that has quickly become a flashpoint in French politics, far‑left presidential hopeful Jean‑Luc Mélenchon of the France Unbowed (LFI) party renewed his call for the central bank to cancel the 18% of French sovereign debt it currently holds. Mélenchon told supporters that the bonds could simply be “thrown into the fire,” arguing that doing so would lower France’s headline debt‑to‑GDP ratio, which now exceeds 116%.
Details of the proposal
The plan, still lacking a concrete operational roadmap, hinges on the Bank of France wiping out the bonds on its balance sheet. Mélenchon suggests that this move would free fiscal space for additional public spending, a key promise of his campaign platform.
While the idea has attracted some attention from voters seeking bold solutions to France’s fiscal challenges, it has also drawn sharp rebuke from the current government. Prime Minister Sébastien Lecornu, who has served as France’s fifth prime minister in under two years, described the proposal as “fraud in its purest form.” He warned that such a step could spook investors at a time when France needs to raise roughly €310 billion ($361 billion) this year.
Institutional and market concerns
European Union treaties forbid a central bank from directly financing a government, a rule that many policymakers say would be breached by Mélenchon’s suggestion. Former IMF chief economist Olivier Blanchard called the debate “idiotic,” noting that canceling the bonds would deprive the state of interest income and could erode confidence among private investors.
The Bank of France declined to comment on the proposal, but its former governor, François Villeroy de Galhau, has previously warned that wiping out government bonds could force France to abandon the euro and would leave a massive loss for taxpayers to absorb.
Support and opposition within France
Not all financial figures have dismissed the idea. Left‑leaning investment banker Matthieu Pigasse, who recently secured a mandate to restructure Venezuela’s debt, expressed support, claiming the cancellation would have “no economic or financial impact.” His remarks prompted a heated exchange on the social platform X with Blanchard, who reiterated the potential damage to market confidence.
A recent poll indicated that Mélenchon is positioned for a runoff against far‑right leader Marine Le Pen in the upcoming presidential election, suggesting that his unconventional proposals are resonating with a segment of the electorate.
Broader context
The debate echoes earlier calls made during the COVID‑19 pandemic for the European Central Bank to cancel government bonds purchased from commercial banks. Those proposals were also rejected on the grounds that they would effectively turn the central bank into a government lender, undermining the credibility of the eurozone’s monetary framework.
As France grapples with a record‑high debt load and the need to finance public services, the discussion over Mélenchon’s plan highlights the tension between radical fiscal ideas and the constraints of European Union law and market expectations.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
