ECB's Lagarde says solution to French debt woes is at home

According to Business Recorder, ECB chief Christine Lagarde said on Wednesday that France must address its debt concerns mainly through fiscal measures. Her comments, made at an event in Bangkok, downplayed expectations that the central bank would step into the bond market to support Paris. The remarks came as French government debt was among the hardest hit by a worldwide selloff.

Lagarde told a CNN event that some countries feel more strain than others, with France a clear example, and that the main remedy lies domestically. On the question of ECB help for France, she left the onus on Paris to reassure markets. Analysts have speculated for weeks that the central bank might buy French bonds through its Transmission Protection Instrument, which can be used when the ECB sees market pressure as unwarranted and disorderly.

On monetary policy, Lagarde said euro zone inflation has been driven mostly, though not entirely, by higher energy costs tied to the Iran war. No second-round effects on other prices are visible yet, so the ECB is watching for early hints such as trade union wage demands. Two rate increases have come in the last four months, with another move expected in December. Lagarde judged the 1.1% expansion the IMF projects for the bloc this year as underwhelming but not poor, with German outlays on infrastructure and defence adding support.