France’s leading presidential candidate proposes simply canceling the country’s huge public debt
Translated from Romanian and summarized by DistantNews. Read the original for the full story.
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- Jean-Luc Mélenchon proposes that the Bank of France cancel the portion of French public debt on its balance sheet, which he says would free resources for social programs.
- Bundesbank President Joachim Nagel says eurozone treaties prohibit central banks from canceling national debt and warns the move could trigger extremely high inflation.
- France’s public debt exceeds 116% of GDP, while its deficit approaches 5% and the government plans to raise more than $360 billion through bond issuance this year.
Jean-Luc Mélenchon has offered one of the most radical proposals in France’s presidential campaign for dealing with the country’s swollen public debt: have the Bank of France cancel the debt it holds.
The left-wing candidate says the move would give the government more room to finance social programs. His proposal targets the 18% of French debt held by the central bank, not bonds owned by private investors. In unusually blunt language, Mélenchon said, “All we have to do is take the 18% held by the Bank of France and throw it into the fire.”
All we have to do is take the 18% held by the Bank of France and throw it into the fire.
He has left open the possibility of pursuing a broader European solution. “Why did we create a single currency and a European Central Bank together? We can do this too, and I am convinced that we would find allies in Europe,” he said. For now, however, he said he was not seeking to cancel debt held by private creditors.
Why did we create a single currency and a European Central Bank together? We can do this too, and I am convinced that we would find allies in Europe.
The plan runs directly into eurozone rules. Joachim Nagel, president of Germany’s Bundesbank and a member of the European Central Bank’s Governing Council, told Le Monde that central-bank debt cancellation is prohibited by European treaties. “No central bank in the Eurosystem, nor the ECB, is allowed to cancel national debt,” Nagel said. He described such a step as monetary financing of government, which European law forbids, and warned it could fuel extremely high inflation.
The debate comes as France faces mounting pressure from financial markets. Public debt has risen above 116% of gross domestic product, while the economy has recorded modest growth in recent years. The budget deficit is nearing 5% of GDP, well above the European Union’s 3% limit. The government also remains heavily dependent on financial markets and plans to raise more than $360 billion this year by issuing bonds.
No central bank in the Eurosystem, nor the ECB, is allowed to cancel national debt.
About this summary
Originally published by Adevărul in Romanian. Translated, summarized, and contextualized automatically by DistantNews, with a note on how the source frames the story. Not individually reviewed before publishing. How this works.
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