Lagarde rejects French far-left leader's debt-cancellation plan as 'financially dangerous'

European Central Bank President Christine Lagarde rejected French far-left leader Jean-Luc Mélenchon's proposal to cancel 18% of France's national debt, calling it "financially dangerous" and legally impossible under EU law. Lagarde said creditors would punish such a move, comparing it to a borrower refusing repayment and then seeking new financing, which would lead to higher interest rates. She also cited Article 123 of the EU's founding treaty, which bars debt cancellation, calling the rule "a pillar of stability." Mélenchon argued the debt portion held by the Bank of France could be cancelled to free up fiscal space for social spending, as France's debt exceeds 116% of economic output. Lagarde made the remarks after the ECB raised interest rates.