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France To Contest EC Decision On Savings Accounts

by Ulrika Lomas, for, Brussels

25 June 2007

The French authorities last week revealed that they would be contesting a European Commission decision to end the special rights of Banque Postale, Caisses d’Epargne and Crédit Mutuel to distribute tax-privileged savings books known as the "livret A" and the "livret bleu".

The "livret A" and the "livret bleu" are savings products to which the State has granted tax-exemption. They are distributed exclusively by the three banking networks in question, which, in return for an intermediary’s fee, transfer the sums collected to the "Caisse des Dépôts et Consignations", which uses them to finance social housing. Some 50 million French citizens have such savings books, which represent a total value of EUR128 billion.

The EC believes that the reserved distribution of these products constitutes a restriction on freedom of establishment and freedom to provide services, and creates an obstacle for French and foreign competitors wishing to enter and develop within the liquid banking saving market in France.

Following the initiation of procedures regarding the exclusive arrangement last June, the EC in May 2007 gave the French authorities just nine months to amend the regime.

The Commission stated last month that it "considers that the special distribution rights in question constitute a restriction which is incompatible with Community law and are not essential to ensure the satisfactory provision of the two services of general economic interest cited by the French authorities, namely the financing of social housing and the accessibility of basic banking services".

It continued:

"The requested change to the method of distributing the savings books does not jeopardise the tasks of general interest with which they are associated and does not entail any deterioration in the way in which these savings books operate for individuals."

Competition Commlissioner Neelie Kroes added:

“With this decision, the Commission is opening up the distribution of "livrets A" and "livrets bleus" for the benefit of consumers without harming or undermining the role of attracting funds for financing social housing, which is accepted as a service of general economic interest.”

However, reports in the European media last week revealed that the government intends to appeal the Commission's decision to axe the scheme, and will be commissioning an examination of other, possibly less drastic, reforms to the tax-advantaged savings regime.

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