Livret A rate to stay at 1%

Ministry of Finance rejects Bank of France recommendations to cut already historic low rate by another 0.25%

THE GOVERNMENT has decided to hold interest for the Livret A savings account at 1%, despite a recommendation from the Bank of France to slice another 0.25% off the rate.

The ministry of finance decided that the interest rate at its historically low level despite a stark warning from Bank of France governor Christian Noyer, who told Europe 1 radio that "staying at 1% would be irresponsible”.

The Livret A is calculated using a formula that takes into account the rate of inflation and adds 0.25%. At the end of 2014, inflation in France was at 0%, meaning that the Livret A rate should, according to the formula, be 0.25%.

But finance minister Michel Sapin announced yesterday evening that the government had decided to deviate from the formula and from the recommendation of the Bank of France.

It is not the first time the minister has ignored the advice of the Bank. This time last year, then-finance minister Pierre Moscovici said he would not lower the rate from 1.25%.

Interest was cut to the current 1% rate last summer, but even then it was higher than the Bank was asking.

Average savings in a Livret A account in 2013 were €4,063, according to figures quoted by Le Figaro. But, the low interest rates last year prompted many people to withdraw money from the accounts.

Despite concerns there are still 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.