Jean-Luc Mélenchon, a far-left presidential candidate in France, has reignited controversy with his proposal to cancel French debt held by the central bank. His plan, which he describes as taking the 18% of debt held by the Bank of France and "chucking it in the fire," aims to reduce France's public debt ratio, currently over 116% of GDP, and create more room for public spending. The Eurosystem, comprising the ECB and national central banks, holds approximately one-sixth of French debt, totaling around €600 billion.
The proposal has sparked significant backlash from across the political spectrum and economic experts. Prime Minister Sébastien Lecornu called it a "scam," while Jordan Bardella, president of the far-right National Rally, labeled it "nonsense." European Central Bank President Christine Lagarde stated the idea "doesn't make sense and would be financially dangerous." Critics, including former IMF Chief Economist Olivier Blanchard, view the plan as "irresponsible" and a "false solution" that would destabilize the economy and potentially jeopardize France's position within the eurozone by violating EU treaties that forbid central banks from financing governments. Economy Minister Roland Lescure even suggested that tampering with the Bank of France's balance sheet would be akin to "leaving the euro.
While Mélenchon's rivals uniformly criticize the plan, they acknowledge the importance of addressing France's public debt, which exceeds €3.5 trillion, or 117.5% of GDP. Economists like Aurore Lalucq, while having supported similar measures during the Covid crisis, argue that current high inflation makes such a move detrimental. They also warn that a unilateral action by France could spook investors, making it difficult for the country to raise necessary funds. Despite the widespread condemnation, Mélenchon's campaign has successfully brought the debate on fiscal orthodoxy to the forefront of the presidential election, with one of his lieutenants noting, "We are very happy there is a controversy on debt." Even a prominent banker, Matthieu Pigasse, has surprisingly endorsed the proposal, engaging in public debate with critics like Blanchard.
