As political instability intensifies in France, many among the wealthy are moving assets overseas or leaving the country. Experts predicted that France's asset outflows, which began in earnest in 2024, will continue for the time being.
According to the Financial Times (FT) on the 19th, high earners and entrepreneurs in France, as political turmoil persists, are transferring funds into so-called "safe assets," such as Luxembourg pension-style insurance products and Swiss budget accounts. In June last year, France's National Assembly was dissolved early by President Emmanuel Macron, splitting the legislature and intensifying interparty clashes over budget policy, while the government has continued unstable state management amid frequent cabinet reshuffles.
Confusion over economic policy in France has persisted for a long time. Since the resignation of Prime Minister Élisabeth Borne in 2023, a total of five prime ministers failed to complete their terms due to budget and fiscal policy conflicts in parliament. Just last month, Prime Minister François Bayrou stepped down after losing a confidence vote by a majority, and his successor, Prime Minister Sébastien Lecornu, also submitted a resignation letter 27 days after being appointed, causing turmoil before being reappointed.
In fact, France's economic situation is tough. France spends 30% of gross domestic product (GDP) on social security, its national debt stands at 115.6% of GDP, and the fiscal deficit far exceeds the European Union (EU) fiscal rule threshold of 3%, reaching 5.8% of GDP. Macron belatedly proposed an austerity budget, but with anti-austerity protests and union strikes erupting nationwide, France, once touted as an "economic powerhouse," is struggling to find its footing.
Amid this, France's high-income class and entrepreneurs are sensing a move to strengthen taxes and are moving assets overseas. According to the FT, Luxembourg-based life insurance has become rapidly popular among asset holders in France, as it is a high-value savings product that offers tax benefits if held for more than eight years.
According to the Luxembourg financial regulator, the aggregates invested by French people in Luxembourg life insurance surged 58% last year to 13.8 billion euros (about 22 trillion won), a record high. Industry experts say inflows into the products have continued in the first half of this year, with invested amounts rising quickly.
Guillaume Luchini, chief executive officer (CEO) of asset manager Scala Patrimoine, said, "Most of the assets under management are now moving outside France, and inflows into Luxembourg life insurance products in particular are rising steeply." Tax specialist Olivier Roumellian noted, "Since last year, the movement of funds has not stopped, to the point where advisory firms hardly even need to solicit business."
Moreover, more French tycoons are choosing to emigrate. Philippe Kennel, an attorney in Switzerland who handles tax and asset management matters, said, "Swiss immigration, which was in the spotlight between 1980 and 2010, is popular again, with inquiries about moving surging recently," adding, "Trust in political and economic stability, more than taxes, is the main reason." Spain and Portugal are also known to have strong immigration demand.
In particular, experts warn that the movement of funds to Luxembourg may be a stage of accelerating "exit from France" beyond simple tax savings. For example, Luxembourg life insurance products have a high minimum investment of 250,000 euros (about 400 million won) and offer no direct tax benefits, but depositing funds abroad has the advantage of streamlining procedures later if a decision to emigrate is made.
Sandrine Zunet, co-founder of Carra Capital, explained, "Even if there is no thought of leaving France right now, keeping funds outside creates room to move at any time."
Meanwhile, on the 17th, international credit rating agency Standard & Poor's (S&P) downgraded France's sovereign credit rating by one notch to A+ from AA-. Earlier, another international credit rating agency, Fitch, also downgraded France's sovereign credit rating by one notch to A+ from AA- last month, citing the fiscal deficit. Moody's is also expected to announce France's credit rating soon.