Posted on Jan 13, 2021 2:59 PMUpdated Jan 13, 2021, 4:00 PM
“Wanting to cancel the debts held by the European Central Bank and the Bank of France would mean leaving the euro. ” François Villeroy de Galhau’s warning to the Finance Committee of the National Assembly on Wednesday morning is unambiguous. While the debate on the cancellation of all or part of the State debt held in the portfolio by the Eurosystem (the ECB and the national central banks) does not seem to be weakening, the Governor of the Banque de France wanted to make a focus. “The cancellation of the public debt is a seductive illusion but it is not a solution”, he said, recalling that “That would amount to directly financing the States, which is prohibited by the founding treaties of the euro”.
For the advocates of cancellation, it would be enough to change these treaties. An argument that he sweeps aside. “We sometimes hear that this ban on monetary financing of deficits is a simple European ban, another Brussels standard…, replied François Villeroy de Galhau. But it’s much more than that. It is the word of France committed to its European partners and which engages confidence in the currency. “