Fears for Livret A 1% interest rate

THE INTEREST rate on France's most popular tax-free savings account could be cut to a new record low next month.

The rate paid on the Livret A is tracked against inflation and new figures out this week show the French economy grew by 0.3% in the year to the end of June.

There are more than 61 million Livret A accounts open in France and they currently pay 1% interest - the lowest return since the scheme was created in 1818.

The governor of the Banque de France, Christian Noyer, says it is "unthinkable that the rate won't be reduced this year".

The decision on whether to change the rate is one for the government - and some economy-watchers are pointing to regional elections this December as a possible reason why they might leave the rate unchanged.

The low return is already encouraging savers to move their cash elsewhere. Last year €6.13billion was withdrawn from Livret A accounts.