French debt cancellation risks eurozone exit, inflation, central bank warns
French central bank warns debt cancellation risks eurozone exit and inflation without reducing deficits.
Event / Economy
French Debt Cancellation Debate
Emmanuel Moulin, Governor of the Bank of France, and ECB President Christine Lagarde criticized Jean-Luc Mélenchon's proposal to cancel 18% of French debt held by the central bank, citing violations of EU treaties, inflation risks, and increased borrowing costs. French 10-year bond yields reached 4.44%, the highest since 2008.
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2026-09-11 to 2026-11-06 · UTC publication dates
Coverage begins 11 Sept, 14:35 UTC
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What happened
French central bank governor warns debt cancellation would trigger eurozone exit
Emmanuel Moulin warned that canceling French debt held by the Bank of France, which has received no support elsewhere in Europe, would lead France to exit the eurozone. He compared the eurozone to a co-ownership building where member states must pay their share or face expulsion.
French debt cancellation would create inflation risk, central banker warns
Emmanuel Moulin argued that debt cancellation would be dangerous because it would create inflation and increase interest rates, making it harder for France to borrow on financial markets and ultimately harming French citizens.
Bank of France governor says debt cancellation would not reduce deficit
Emmanuel Moulin argued that debt cancellation would be ineffective because it would not free up fiscal space or reduce the budget deficit. He noted that reducing state debt by 500 billion euros would simply create a 500 billion euro hole at the Bank of France, providing no net benefit.
ECB President Lagarde calls French debt cancellation a treaty violation
Christine Lagarde, President of the European Central Bank, stated that canceling French debt held by the ECB would constitute a violation of EU treaties.
French 10-year bond yields reach highest level since 2008
On Thursday evening, French government 10-year bond yields reached approximately 4.44%, the highest level since 2008, while German equivalent yields stood at approximately 3.50%, the highest since 2011. The spread between the two reached approximately 0.94 percentage points, the highest level since 2012.
Governor of Bank of France says debt cancellation proposal violates EU treaties
Emmanuel Moulin, governor of the Bank of France, stated on RTL that Jean-Luc Mélenchon's proposal to cancel 18% of French debt held by the central bank would be illegal because it violates EU treaties, specifically Article 123 of the Treaty on the Functioning of the EU which prohibits monetary financing of states.
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2 alternative perspectives
EU Officials Warn French Debt Cancellation Plan Violates Treaty Obligations
EU officials warn French debt cancellation violates EU treaties.