Lagarde rejects Mélenchon's proposal to cancel French debt held by the central bank

ECB draws a treaty line

European Central Bank President Christine Lagarde rejected French presidential candidate Jean-Luc Mélenchon's proposal to cancel government debt held by the Banque de France. Speaking after the ECB's September 10 policy meeting, Lagarde described the idea as incompatible with the European Union treaties. Mélenchon has proposed eliminating the portion of France's debt owned through the central-bank system, which Euronews put at about 18% of the total.

The intervention turns an older campaign proposal into a current institutional confrontation. Mélenchon revived the plan in August as France moved toward its April 2027 presidential election. The central question is not simply whether writing off the securities would reduce the headline debt stock. It is whether a national government could direct a euro-area central bank to absorb that loss without violating the legal boundary between fiscal decisions and monetary financing.

Why Article 123 matters

Article 123 of the Treaty on the Functioning of the European Union prohibits the ECB and national central banks from providing credit facilities to governments and from directly purchasing their debt instruments. The treaty text does not expressly describe every possible cancellation scenario, but the provision is designed to stop governments from financing themselves through central-bank money. Lagarde's position is that cancelling the holdings would cross that boundary.

The dispute arrives while France is already under heightened EU fiscal supervision. Council documentation says member states should keep deficits below 3% of GDP and debt below 60%, while France remains in an excessive-deficit procedure. That context explains why the proposal has significance beyond French electoral politics: any unilateral attempt to alter central-bank assets could test the shared legal and institutional framework supporting the euro.

Campaign consequences

Mélenchon's proposal may appeal to voters who see debt-service costs as limiting public investment and social spending. Its opponents argue that cancellation would damage confidence in French obligations and central-bank independence. The immediate watchpoints are whether Mélenchon develops a legally detailed mechanism, whether other candidates adopt competing debt plans and whether the issue reaches European courts or institutions. For now, the ECB has made clear that it regards the proposal as a treaty question, not merely a national budget choice.