PARIS, July 18 France on Thursday cut the
interest rate on hugely popular tax-free savings accounts for
the second time this year in view of falling inflation, but
limited the reduction to protect savers' purchasing power.
The politically sensitive cut in returns on the accounts
comes as consumer morale sits at record lows, jobless numbers at
all-time highs and as the economy is stagnating.
Some 63.3 million of the so-called Livret A accounts were
held in France at the end of last year - almost the same number
as the population, although some are thought to hold more than
one account illegally.
The Bank of France had recommended that the interest rate
paid on so-called Livret A accounts be cut from 1.75 percent to
1.25 percent as of Aug. 1. Strictly applying the rules for
calculating the rate based on inflation would have meant a cut
to 1.0 percent.
"The measure we are taking today aims to support the buying
power of people on low incomes," Finance Minister Pierre
Moscovici told journalists.
The central bank and commercial banks say the high-interest
Livret A accounts discourage savers from buying stocks or
putting their money into other investments that could help
Retail banks have to hand most of the cash deposited in
Livret A over to state lender Caisse des Depots for investment
in public projects, meaning they cannot count on it to beef up
their deposit bases and make more loans.
Deposits in the tax-free accounts hit a record high 262.1
billion euros ($343 billion) in May after the government raised
the cap on the accounts to 22,950 euros in January.
($1 = 0.7637 euros)
(Reporting by Emmanuel Jarry; Writing by Ingrid Melander;
Editing by Leigh Thomas)