A radical proposal by French far-left presidential candidate Jean-Luc Mélenchon to "cancel" roughly €488bn of government bonds held by the Banque de France has ignited a fierce debate ahead of the 2027 election. Mélenchon claims the move would not constitute a default and would free up funds for climate spending, arguing "no one will ever notice that they've disappeared." However, European Central Bank president Christine Lagarde and Prime Minister Sébastien Lecornu have sharply rebuked the plan, labeling it illegal under EU treaties, technically flawed, and tantamount to theft. Lagarde stated it would amount to monetary financing of the government, a direct violation of the EU's founding treaty.

The controversy arrives as France faces a deficit exceeding 5 per cent of GDP and debt nearing 120 per cent of GDP, pushing 10-year borrowing costs above 4.6 per cent — the highest since 2008. The spread over German bunds has topped 1 percentage point for the first time since the Eurozone crisis. Investors are nervous as polls suggest Mélenchon could reach a runoff against far-right leader Marine Le Pen, whose own spending plans also worry markets.

The government has proposed a €54bn savings package for 2027, though all major candidates oppose it.