Livret A rate drops to 1%

THE INTEREST paid on Livret A savings accounts - the most popular small savings account in France - will fall from 1.25% to a record low of 1% next month.

Announcing the cut, the ministry of finance said in a statement that the reduced rate was still above the current level of inflation, which stands at 0.5%, according to national statistics office Insee.

The ministry said it was, “anxious to find a balance between fair compensation for French savers … but also the need to preserve the cost of loans to social housing organisations.”

Although a record low for the popular savings account, the new rate remains higher than the 0.75% rate recommended by Banque de France governor Christian Noyer.

He said in a statement that his proposed rate, down 0.5% on the current level, gave, “clear priority to support growth and employment by reducing the cost of financing the economy.

“This rate also allows to ensure a return on savings significantly above inflation over the coming months.”

Last month, the governor warned that Livret A rates may have to fall, saying that it would be “good to revive the economy and create jobs”.

The government has heeded his advice, but not cut interest by as much as his calculations suggested.

There are an estimated 63 million Livret A accounts in France. They are tax-free savings accounts limited to one per person, adult or child, resident or non-resident. The most that can be deposited in a single Livret A account is €22,950.

Average savings in a Livret A account last year were €4,063, though 45% of accounts had less than €150, according to figures quoted by Le Monde.