France is weighing tax breaks for grandparents who hand cash to their grandchildren as a way to boost the economic recovery and mobilise more than €100 billion ($118 billion) of excess savings built up during the pandemic.

Turning savings into spending is crucial for economies in European countries like France, where massive government aid to prop up incomes during lockdowns has largely been stashed by consumers. French Finance Minister Bruno Le Maire estimates the sum of excess savings could total €200 billion by the time the crisis is over — twice the amount the government has earmarked for its plan to reboot economic growth.

The tax break plan could prove controversial as the it would only favour families wealthy enough to pass money down to their children and grandchildren. Yet Le Maire said the vast majority of French people have made extra savings and tax exemptions would only be “several thousand” euros and not tens of thousands.

“What kind of country are we living in? For me, giving a few thousand euros to your grandson or granddaughter isn’t a policy for rich people; it’s a policy of fairness for the middle classes, for solidarity between generations,” Le Maire said.

Current rules in France mean parents can hand down a total of 131,865 euros to their children, tax-free over 15 years. For grandparents, the tax-free transfers are effectively capped at €63,730 every 15 years.

Le Maire reiterated that the government would not raise tax on excess savings to encourage spending, as some leftist lawmakers have called for.

“It would be deeply unjust at a time when people have put money aside for unexpected events during the crisis, and it would be totally ineffective because it would prevent an economic recovery,” Le Maire said.

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