Carney in Beijing: A High-Stakes Push to Reset Canada-China Trade

Poland is carefully monitoring potential market turmoil stemming from a US investigation into the Federal Reserve as it weighs issuing dollar-denominated debt later this year. The Eastern European nation, which carries a public debt load larger than that of Malaysia, Turkey, and Argentina, has significant exposure to the US currency, having sold two dollar bonds last year and maintaining at least 11 such notes outstanding.

Karol Czarnecki, head of the Polish finance ministry's public debt department, confirmed the government's cautious stance. "We are taking a deep look," he said in an interview. "We cannot exclude that the development of the situation will be adverse for issuers, but for the moment we're not discounting a disaster."

Scrutiny on Fed Independence Sparks Concern

The market uncertainty follows a probe by the Trump administration into the remodeling of the US central bank's headquarters. This move is widely seen as a significant escalation in attacks on the Federal Reserve, raising fresh concerns about the institution's political independence.

For sovereign issuers like Poland, any instability in US markets or perceptions of the Fed could directly impact the cost and viability of issuing dollar-denominated bonds.

Poland's Broader Foreign Debt Strategy

The potential dollar issuance is part of a broader strategy to front-load its 2026 borrowing plans, which could total as much as €12 billion ($14 billion) in foreign-currency debt sales this year. Czarnecki noted that Poland's options extend beyond the dollar to include the Japanese yen. He also highlighted the Swiss franc as an "interesting proposition" due to favorable pricing and demand dynamics.

Poland has already been active in the market, selling a total of €3.25 billion in 5- and 10-year euro-denominated notes last week. However, Czarnecki suggested another euro transaction is unlikely until after the summer to allow the market time to absorb the recent supply.

Maintaining Flexibility in Volatile Markets

While Poland last sold bonds in Japanese yen in 2024 and has not tapped the public Swiss franc market since 2015, any future transactions in dollars or yen will hinge on market conditions. The government is preparing for multiple scenarios to navigate the current uncertainty.

"We are pretty much ready for both markets," Czarnecki explained. "We have a kind of optionality in case something wrong happens, to choose the market we want to enter."

Source: reuters

Saudi Arabia's Public Investment Fund is transferring roughly $12 billion worth of gaming company shares, including firms such as Nintendo Co. and Bandai Namco Holdings Inc. to its subsidiary Savvy Games Group.

Savvy's status as a powerhouse in the industry will grow as the company still possesses billions of dollars earmarked for future investment in gaming businesses. Once the transferrals are complete, Savvy will own about 10% of firms such as Koei Tecmo Holdings Inc., NCSoft Corp., Nexon Co. and Square Enix Holdings Co., according to a company document reviewed by Bloomberg news.

Savvy was established in 2021 to help the country diversify its holdings away from oil. With $38 billion to invest, Savvy bought up Monopoly Go developer Scopely Inc., Pokemon Go developer Niantic, and several esports organizations. While Monopoly Go was a breakout success, Savvy's esports investments have been troubled and the company has let staffers go.

The PIF did not respond to a request for comment. Although the fund is the largest investor in Electronic Arts Inc.' $55 billion buyout, Savvy is not involved with the transaction, according to a person with knowledge of the buyout.

The government arm already transferred its 11 million shares of Take-Two Interactive Software Inc., according to a late December regulatory filing. Savvy will inherit the PIF's hands-off approach and has no plans to become active investors, according to the person.

The transfer has been planned for a long time, according to Amar Batkhuu, a Savvy spokesperson. "These transfers will move the stewardship of PIF's games investments to Savvy, given Savvy is a leading games organization for the PIF and a core component of the National Gaming and Esports Strategy," he said. There are no plans to change the investment strategy, he added.

Source: Bloomberg Europe

Austria’s coalition government has unveiled a new package of tax cuts and subsidies aimed at lowering costs for households and businesses. The move is a direct response to persistent inflation and the rising popularity of right-wing nationalist parties in recent polls.

What's in Austria's New Economic Package?

The government announced on Wednesday that the program will be rolled out over the next six months. The core measures are designed to provide immediate relief from high prices.

Key components of the plan include:

• VAT Reduction: Value-added taxes on staple foods will be cut in half.

• Consumer Energy Relief: Electricity prices for consumers are set to fall by approximately one-third.

• Industrial Power Cap: Industrial electricity users will have their prices capped at €50 ($58.23) per megawatt-hour, a policy that mirrors subsidies introduced by neighboring Germany in November.

"We want to not only slow down inflation in key areas, but also to ensure prices actually fall – for energy and for the most important staple foods," said Vice-Chancellor Andreas Babler, who supports active economic management.

This marks the second time in a month that the coalition—comprising the conservative People's Party, the Social Democrats, and the liberal Neos—has intervened in the market. In December, it passed legislation requiring state-owned utilities to prioritize affordable electricity over maximizing profits for shareholders.

Tackling Inflation Above the Eurozone Average

Since taking office last year, the Austrian government has struggled with inflation rates that have consistently outpaced those in other European Union member states. This has been partly attributed to companies passing on the costs of faster wage increases to consumers.

According to Eurostat, Austria's annual inflation slowed to 3.9% in December. While an improvement, this figure is still nearly double the 2% average across the 21 EU countries that use the euro.

Political Pressure Mounts as Far-Right Gains Ground

The economic measures are also a strategic political move. The far-right Freedom Party has seen a surge in support by focusing its campaign on affordability and migration, and it currently holds a significant lead in polls.

With its mandate scheduled to run until late 2029, the current government is under pressure to address the economic concerns fueling its political rivals.

A Future-Forward Push: €2.6 Billion for High-Tech

Beyond immediate cost-cutting, the package also includes a significant investment in technology to attract high-tech industry. Chancellor Christian Stocker announced that the plan allocates €2.6 billion for strategic sectors, including:

• Artificial intelligence

• Quantum computing

• Photonics

Additionally, the government is expected to pass legislation that will permit autonomous-driving vehicles on Austrian roads, signaling a broader push toward future-focused economic development.

A powerful parable once captured the world's anxiety about a rising China. Today, that same story explains the disruptive behavior of the United States. The metaphor, from strategist Edward N. Luttwak, describes a crowded elevator where the passengers are nations.

Luttwak wrote, "Riders in a crowded elevator cabin into which an extremely fat Mr. China has just stepped in must react self-protectively if he is becoming fatter at a rapid rate, squeezing them against the walls—even if he is entirely unthreatening, and indeed affable."

He noted that the elevator already contained "an even fatter, louder, and frequently violent Mr. America," but his presence was familiar. Everyone had accommodated his bulk over the decades.

Published over ten years ago, this imagery perfectly captured a period of intense nervousness about China's rapid economic transformation. Western countries, led by the US, watched uneasily as China gained on them.

When China's Rise Made the World Nervous

While Luttwak suggested China could be "affable," its actions felt far from unthreatening to its neighbors. The sense of being squeezed was acute for countries like Japan and the maritime nations of Southeast Asia. They felt bullied as China built a blue-water navy to enforce extralegal claims over regional seas.

The advice I offered in my 2017 book, Everything Under the Heavens, was for the United States to remain calm. The country's best path was to keep its own house in order by staying open to the world and investing in its strengths in science and education. Washington was advised not to overreact with aggression but to strengthen its alliances and reinforce international law.

This strategy would have leveraged America's soft power, democracy, and rule of law, compelling China to compete on terms highly favorable to the US. While China has invested heavily in its own strengths like education, it has largely kept its head down diplomatically.

How Trump Flipped the Geopolitical Script

Two things have fundamentally changed since Luttwak wrote his parable. First, the world has grown accustomed to China's economic weight; its growth is now seen as a matter of fact, not a mind-blowing shock. Second is the astonishing behavior of the United States under President Donald Trump.

Over his terms, Trump has pursued policies that are the opposite of the calm, alliance-focused approach once recommended. In recent weeks, his administration's hyperaggressive actions have brought the elevator parable powerfully back to mind, but with the roles reversed.

With actions in Nigeria, Syria, and Venezuela—where Trump declared himself "acting president" after ordering the abduction of Nicolás Maduro—and threats against Iran, it is now the United States squeezing other countries against the elevator walls.

While China’s expansion was primarily economic, the US under Trump has pursued a different path reminiscent of the imperial age: territorial aggrandizement. The result is almost unimaginable. Today, it is often China, not the United States, that appears to be the global status quo power.

The most glaring example is Trump's escalation of claims to Greenland, with rhetoric vowing to get it "one way or another." This language echoes gangster films more than diplomacy and threatens to break Washington's relationship with Europe, turning a wary alliance into something far more distant.

The Global Reaction: Hedging Against An Unpredictable America

When one passenger in the elevator becomes aggressive, disregarding conventions, the others eventually have no choice but to push back. This is the reality the world is facing after Trump declared he has no use for international law, limited only by his own "morality."

This pushback doesn't necessarily mean mirroring the aggression. Instead, countries seek strength in numbers, forming coalitions to protect their interests. In international relations, this strategy is called hedging. It’s what nations do when long-standing partnerships are cast into doubt. We can expect to see much more of it.

Two key examples are already visible:

• Europe's trade deal with South America: A long-belated agreement finalized as a clear hedge against deteriorating transatlantic relations.

• Saudi Arabia's strategic pivot: Despite being heavily courted by Trump, Saudi Arabia has held talks to acquire Chinese fighter jets and has struck a mutual defense pact with nuclear-armed Pakistan. Even with access to America's most advanced weapons, Trump's erratic behavior has made the Saudis nervous.

America's Flawed Pivot to its Own Hemisphere

The urge to hedge is an ominous sign for the United States. The current administration is pursuing a foolhardy geopolitical shift, weakening commitments to allies in Europe and Asia for the fantasy that dominating the Western Hemisphere will make America better off.

This strategy is sheer folly. Latin America cannot compare to traditional allies like NATO, Japan, and South Korea in wealth, innovation, technology, or manufacturing. While reinvesting in Latin America is a worthy goal, abandoning established, powerful partnerships for a new hemispheric focus is a strategic error.

Furthermore, by throwing its weight around in Venezuela, and threatening to do so in Colombia, Mexico, and Cuba, the United States is ensuring that this balancing behavior will eventually come to its own backyard. It is only a matter of time.