What a Misunderstanding of Economic Financing!
Euro-denominated life insurance policies are anything but unproductive, as has been repeatedly pointed out since the adoption of this surprising new tax.
As of the end of June 2025, the total amount invested in life insurance exceeds €2.05 trillion, two-thirds of which is invested in corporate securities and nearly one-quarter in government bonds. This savings is in no way sterile for society as a whole. The trust and engagement of French savers in this vehicle directly nourish the real economy.
The Myth of Idle Bank Deposits
While much has been said about euro life insurance policies to re-establish their economic usefulness, the myth of “idle” bank deposits seems to persist. Yet bank deposits can in no way be described as “unproductive.”
As of mid-2025, total bank deposits amount to about €2.6 trillion. The total volume of loans granted by credit institutions to French residents stands at around €2.9 trillion — €1.4 trillion to businesses and €1.5 trillion to households.
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An Economic Aberration
Deposits do not sleep! Banks are massively financing the French economy — precisely thanks to these bank deposits, whatever their form: checking accounts, term deposits, savings accounts, and so on.
And while large companies and mid-sized firms can access financial markets directly — though they still rely partly on bank financing — small and medium-sized enterprises, self-employed professionals, shopkeepers, artisans, and households can only obtain financing through banks. Bank deposits are therefore indispensable to the French economy and intensely productive.
To impose a 1% tax on sight deposits — which earn nothing for their holders but are essential to the economy — would be an economic and financial absurdity. Rational savers would seek to reduce their sight deposits as much as possible. Alternatively, they might shift their savings to interest-bearing bank products, driving up banks’ funding costs and, consequently, the cost of credit. Such a shift would weigh on economic growth.
Another predictable consequence would be a transfer of savings to non-bank instruments, forcing banks to reduce lending to the economy — again hampering growth and employment.
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The Same Effect on Term Deposits
Currently, term deposits yield around 2% over 3–6 months, sometimes less. Their remuneration depends on the European Central Bank’s key interest rates. Taxing household deposits held by those subject to the “unproductive wealth tax” (i.e., those with total assets of at least €1 million) at 1% would wipe out at least half of that return — before income tax on savings is even applied.
Since these interest earnings are already taxed at the flat rate, the remaining net return after this double taxation would be negligible. The result would be an inevitable flight of funds.
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Let’s Avoid Misunderstanding the Basics of Economic Financing
As in many aspects of economics, what matters most is balance — an effective balance between consumption and saving, so that investment can take place and generate healthy, sustainable growth.
Savings placed in banks, life insurance, equities, or bonds finance the investments of households (in housing) and businesses. Bank deposits and life insurance are therefore not only useful — they are essential to financing investment and growth.
The figures, as well as the simple description of economic and financial mechanisms, make this clear. Out of ignorance or excess zeal, let us not create damage for the French economy and for society as a whole.
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Olivier Klein is a professor of economics at HEC and a bank C executive.