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

BERLIN, Sept 10 (Reuters) - ‌European Central Bank ​President ​Christine Lagarde on Thursday rejected French far-left leader Jean-Luc Mélenchon's plan to cancel a ‌portion of France's national debt, calling it "financially dangerous" ⁠and legally impossible under EU law.

Mélenchon has proposed cancelling 18% ‌of France's debt, which he ‌says is held by the Bank of France, arguing the move would free up fiscal space for ​social spending as France's debt burden tops 116% of the country's economic output.

Asked directly about the ⁠idea, Lagarde said creditors would punish such a move. Comparing public debt ​to a personal loan, she said if a borrower refused to repay and then sought ​new financing, "I'm not going to ‌finance you," adding she would instead "significantly increase the interest rate" charged.

"Really not a good ⁠idea and a large waste of time, however popular that could be in any member state in the euro area," ⁠she said at the ECB's regular press conference after raising ​interest rates.

Lagarde, who is herself a former French economy and finance minister, also said debt cancellation is barred under Article 123 ‌of the Treaty on the Functioning of the European Union — one of the European ‌Union's founding treaties.

She called the treaty "a pillar of stability" ⁠and said that any ‌effort to circumvent ​debt financing rules "would be a pure violation of the treaty".

(Writing by Hugh LawsonEditing by Peter ‌Graff)

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