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Marine Le Pen’s plans to take France out of the euro would consign the country to impoverishment, one of the European Central Bank’s most senior French officials has warned.
Benoît Cœuré, executive board member at the ECB, called the notion of a ‘Frexit’, a choice for “impoverishment” that would “threaten the jobs and savings of the French people”.
Ms Le Pen, leader of the far-right National Front, is vowing to hold a referendum to take France out of the eurozone and redenominate the country’s €2tn of outstanding debt into a new franc after 18 years of membership should she become the country’s new president in May.
Should a Frexit occur, “debts incurred by French businesses and households would increase”, warned Mr Cœuré.
“Inflation, which would no longer be restrained by the ECB, would eat into savings, the fixed incomes of households and small pensions”, he added.
Despite Ms Le Pen’s assurances of an “orderly” exit, the French central banker said “leaving the euro would mean taking risks which have unpredictable consequences”.
The prospect of surging popularity for Ms Le Pen and the apparent demise of one of her main rivals for the job, the right-wing Francois Fillon, has sent the country’s 10-year bond yields to an 18-month at the start of the week.
Investors have dumped French debt, demanding the highest premium in four years to hold its benchmark bonds over Germany’s, as the likes of S&P Global Ratings have warned a Frexit would result in a likely downgrade of France’s sovereign borrower status.
With less than three months since the start of the first round presidential vote, Mr Cœuré said he could “not contemplate” a French vote in favour of leaving the euro, with the latest polling showing around 68 per cent of French people still back membership of the single currency area.
Amid promises by Ms Le Pen to restore monetary sovereignty to France and reverse the forces of globalisation, Mr Cœuré defended the euro, arguing it had proven to have had “greater benefits for the disadvantaged and the vulnerable”.
“The single currency has contained inflation, which is a tax on the poor”, he told Le Parisien newspaper.
He added that the bloc’s current exchange rate was “appropriate” for its economic conditions, after controversial comments from one of Donald Trump’s economic advisers that Germany was exploiting an undervalued exchange rate.
Mr Cœuré said:
The ECB has no specific exchange rate target, but the single currency has adjusted as a consequence.
Since its last peak in 2011, the euro has depreciated by almost 30% against the dollar. The euro is now at a level that is appropriate for the economic situation in Europe.
Image via AFP