It is a sea serpent that emerged during Covid and resurfaced in the midst of a political re-entry dominated by economic issues. Already firmly launched in his campaign, nine months before the presidential election, the rebellious Jean-Luc Mélenchon is putting one of his flagship proposals back on the agenda: canceling part of the French public debt. More precisely, the approximately 18% held by the Banque de France on behalf of the European Central Bank (ECB), or nearly 600 billion euros. A debt which comes from government securities massively repurchased by the Central Bank at the time of the European debt crisis, then during the Covid crisis.
“A simple writing game (…) which would cost nothing,” assures the leader of La France insoumise (LFI). The objective: to loosen the budgetary stranglehold and give France room for maneuver, particularly for investment. During the health crisis, the movement already defended the cancellation of this debt, on condition that it was conditional on a reinvestment of the canceled sums in ecological transformation. “This would make it possible to make essential investments with constant debt,” validates Jézabel Couppey-Soubeyran, lecturer in economics at the University of Paris 1 Panthéon-Sorbonne, who supported this idea in an article published by The New Obs. According to her, the technical levers are “entirely imaginable”, without destabilizing the European Central Bank and the French economy.
The ECB wall
If erasing 18% of debt with the stroke of a pen seems attractive, this proposal is not unanimous among many politicians and economists. For Mathieu Plane of the French Observatory of Economic Conditions (OFCE), this “wave of a magic wand” resembles a “lark mirror” and comes up against numerous obstacles, the main one of which is institutional. Indeed, it would require the approval of the member countries of the euro zone “unanimously” and an agreement to modify the rules which govern the ECB.
“Even if Jean-Luc Mélenchon were president, if he said “I want to cancel the French debt”, he would not be able to do it,” summarizes Mathieu Plane. Or otherwise, we would have to leave the euro zone. » “Imagining this operation on a French scale alone makes no sense,” says Jézabel Couppey-Soubeyran. It would have to be decided at Eurosystem level. However, France cannot force its hand. » And, today, a change of direction from European neighbors and the ECB seems politically and legally very illusory.
A “Pandora’s box”?
Mathieu Plane is also very concerned about the signal sent to the markets. Erasing part of the debt could give the impression that the State can decide unilaterally not to repay some of its creditors. “It’s like opening Pandora’s box: if you cancel this debt, why not another one? » This could also lead, according to him, to a credibility crisis for the European Central Bank, a surge in inflation and an increase in the “risk premium”, that is to say higher rates demanded by investors to lend to France. “We risk panicking everyone and, ultimately, gaining nothing,” he warns.
Jézabel Couppey-Soubeyran is less alarmist. “We can stir up market fear for anything and everything,” she puts things into perspective, dismissing the inflationary risk. It is not monetary creation, but monetary non-destruction. » This heated debate on debt comes at a time when the French borrowing rate has just crossed the symbolic bar of 4%, a first since 2009.
