Iran Protests: Death Toll Nears 2,600 as US Intervention Looms

US President Donald Trump's stated ambition to acquire Greenland is rattling transatlantic relations, prompting a high-stakes diplomatic meeting in Washington and triggering bipartisan opposition at home. The push has created significant friction within the NATO alliance, with European partners expressing alarm over the president's territorial goals.

High-Stakes Talks in Washington

In an effort to manage the growing tensions, US Vice President JD Vance is scheduled to meet with Denmark's Foreign Minister Lars Lokke Rasmussen and Greenland's Foreign Minister Vivian Motzfeldt on Wednesday. The talks, held at the White House, were requested by Rasmussen, who stated he hoped to "clear up certain misunderstandings" with his US counterpart, Marco Rubio.

This meeting follows an uninvited visit by Vance to Greenland in March. During that trip, Vance remained exclusively at Pituffik, the US military base on the island, and did not meet with any of the 57,000 local residents.

Trump's Rationale: "The Hard Way"

President Trump has been increasingly vocal about his intentions. He has argued that the US "needs" the strategically vital Arctic island to preempt a potential takeover by Russia or China, though neither country has expressed such an aim.

On Friday, Trump escalated his rhetoric, declaring he wanted the mineral-rich territory "whether they like it or not." He added, "if we don't do it the easy way, we're going to do it the hard way."

By Tuesday, he doubled down, targeting Greenland's Prime Minister Jens-Frederik Nielsen directly. Trump warned that if Nielsen opposed the acquisition, "that's going to be a big problem from him," while also claiming he didn't "know anything" about the Greenlandic leader. The US president has also framed the potential acquisition as a necessary step for American growth, noting the country has not expanded its land area since Hawaii became a state in 1959. Acquiring Greenland would make the United States the world's second-largest country by land mass, after Russia.

Greenland's Unwavering Rejection

Greenland, a semiautonomous territory of Denmark, has unequivocally rejected the American president's overtures. Prime Minister Nielsen issued a firm statement ahead of the Washington talks to leave no room for doubt.

"One thing must be clear to everyone: Greenland does not want to be owned by the United States," Nielsen stated. "Greenland does not want to be governed by the United States. Greenland does not want to be part of the United States."

Figure 1: Public demonstrations in Greenland highlight the strong local opposition to any potential US acquisition, reflecting the resolute stance of the territory's political leadership.

Bipartisan Backlash in US Congress

Trump's ambitions have provoked a rare bipartisan backlash within the United States. On Tuesday, Republican Senator Lisa Murkowski and Democratic Senator Jeanne Shaheen jointly introduced a bill to prevent the administration from annexing, occupying, or controlling the territory of a NATO ally without that nation's consent.

The senators warned that any attempt to seize Greenland would violate the NATO treaty, damage solidarity within the alliance, and undermine efforts to counter threats from Russia and China.

"NATO remains the most successful defensive alliance in history, and its credibility rests on the shared understanding that member states' sovereignty will be respected and defended by one another," they said.

While the bill's future in the Senate and House of Representatives is uncertain, a similar bipartisan measure has garnered support from over 20 lawmakers in the House. Further demonstrating this opposition, a senior US congressional delegation, including mostly Democrats and one Republican, plans to visit Copenhagen to express solidarity.

"President Trump's continued threats toward Greenland are unnecessary and would only weaken our NATO alliance," said Dick Durbin, the second-highest-ranking Democrat in the Senate.

European Allies Show Solidarity

The controversy has prompted other European nations to signal their support for Denmark and Greenland. France announced it will open a consulate in Greenland on February 6, a move its foreign minister confirmed was a direct response to Trump's threats.

French Foreign Minister Jean-Noel Barrot told RTL radio that the US must cease its menacing posture. "Attacking another NATO member would make no sense, it would even be contrary to the interests of the United States... and so this blackmail must obviously stop," Barrot said.

Figure 1: The Bank of Japan headquarters in Tokyo. The central bank's decision-making is increasingly scrutinized amid domestic and international political pressures.

When central bank chiefs from around the world issued a rare joint statement supporting Federal Reserve Chair Jerome Powell, one major player was conspicuously absent: the Bank of Japan (BOJ). This decision stems from a complex mix of the BOJ's traditional aversion to politics and the Japanese government’s caution in navigating its relationship with the United States, especially with a potential election looming.

Behind the Decision: Government Hesitation

The move was not made in isolation. According to two government sources, the BOJ informally consulted with the Japanese government on whether to sign the statement, which was released on Tuesday. However, officials were unable to provide a timely approval.

"The reason we couldn't immediately say yes is partly because of our relationship with the U.S.," one source explained, speaking on the condition of anonymity.

Both the BOJ and the government have remained tight-lipped on the matter. A spokesperson for the central bank declined to comment, while the government's top spokesperson, Minoru Kiuchi, stated on Wednesday that the issue was under the BOJ's purview.

The global statement was a direct response to the Trump administration's threat of a criminal indictment against Powell, a move that raised fears about the erosion of central bank independence worldwide. While BOJ Governor Kazuo Ueda has consistently emphasized the importance of independence, he has avoided commenting on President Donald Trump's criticisms of the Fed.

Domestic Politics and an Impending Election

Analysts suggest the BOJ's refusal to sign aligns with its long-standing policy of avoiding controversial political topics, a practice rooted in Japan's own history of political interference in monetary policy.

However, the current political climate likely played a key role. Prime Minister Sanae Takaichi, who often highlights her close relationship with President Trump, is widely expected to call a snap election in February. This political backdrop makes any action that could be seen as critical of the U.S. administration particularly sensitive.

"The BOJ's decision is in line with its protocol," said Takahide Kiuchi, a former BOJ board member now at Nomura Research Institute. "But it also shows how it's not completely independent from government interference."

Kiuchi added that criticizing U.S. policy could have direct consequences for Japan's government. "Criticising U.S. policy could put Japan's government under heat from Trump," he noted. "It's safest to avoid making any comment on what's happening overseas."

This cautious approach is not unique to Japan. In New Zealand, the foreign minister publicly rebuked the country's central bank governor for signing the statement in support of Powell.

The Fragile Independence of Japan's Central Bank

Although a 1998 law grants the BOJ nominal independence, it has not been immune to political pressure, particularly calls to maintain monetary support for Japan's economy. While the government cannot dismiss a BOJ governor, it holds the power to appoint the governor and board members, all of whom require Parliamentary approval.

Prime Minister Takaichi, known as a proponent of loose fiscal and monetary policy, created market jitters after taking office in October. She initially asserted that she had control over monetary policy direction and voiced a preference for low interest rates.

Later, as a weakening yen threatened to drive up import costs, her administration consented to the BOJ's decision to raise interest rates to 0.75% from 0.5% in December. Despite this, Takaichi's reflationist advisers continue to warn against further rate hikes.

The upcoming election adds another layer of complexity. If Takaichi secures a strong victory for her ruling party, her administration could fill two upcoming vacancies on the BOJ's nine-member board. Analysts believe it could also influence the choice for the next governor when Ueda's term concludes in early 2028.

"The BOJ is not immune to the kind of things happening with the Fed," Kiuchi warned. "Although not as explicit as the way Trump intervenes, Takaichi has and could make a lot of requests about what the BOJ ought to do."

A Justice Department investigation into the Federal Reserve is ringing alarm bells across Wall Street, with investors and former officials viewing it as a potential new front in a campaign to compromise the central bank's independence. While President Trump denies any involvement, the probe follows his repeated public attacks on Fed Chairman Jerome Powell.

For investors, the implications are serious. Even the perception that political pressure is influencing monetary policy could inject severe volatility into the stock market.

A Pattern of Political Pressure

President Trump has been vocal about his desire for lower interest rates. With his administration's tariffs threatening to slow the economy and federal debt surpassing $38 trillion, cheaper borrowing costs would help offset economic headwinds and reduce the government's debt servicing expenses.

While past presidents have tried to influence the Fed, Trump's methods—combining public criticism, social media attacks, and threats of legal action—are unprecedented.

Figure 1: President Trump has frequently used public platforms to pressure the Federal Reserve and its officials.

Here is a timeline of key events:

• April 2025: After Powell warned that tariffs could trigger stagflation—a mix of high inflation and unemployment—Trump threatened to fire him and called him a "major loser" on social media.

• June 2025: Ahead of a Federal Open Market Committee (FOMC) meeting where rates were expected to be held steady, Trump attacked Powell, calling him a "stupid person" and a "numbskull."

• August 2025: Trump attempted to oust Fed Governor Lisa Cook over a 2021 mortgage fraud allegation, a move the Supreme Court later blocked, reaffirming that governors can only be removed for misconduct in office.

• December 2025: With Powell's term ending in May, Trump publicly stated his next Fed chair must agree to lower interest rates when markets are strong, adding, "Anybody that disagrees with me will never be the Fed chairman." He also threatened to sue Powell for incompetence.

• January 2026: The Justice Department issued grand jury subpoenas to the Fed regarding Powell's June testimony. Powell described the investigation as a pretext designed to pressure policymakers into cutting rates.

Beyond public pressure, Trump may have already influenced the Fed's internal dynamics by nominating Stephen Miran to succeed former Governor Adriana Kugler. In his three FOMC meetings, Miran has consistently voted against the majority, advocating for larger interest rate cuts each time.

Why Fed Independence Is a Market Cornerstone

The Federal Reserve operates as an independent government agency with a dual mandate: maintain stable prices and maximize employment. It achieves this primarily by setting the federal funds rate, a benchmark that influences interest rates throughout the economy.

This independence is crucial. It allows policymakers to make decisions based on long-term economic stability, free from the short-term pressures of electoral cycles. Without it, politicians could force the central bank to cut rates to create a temporary economic boost before an election, even if it meant triggering serious consequences later.

The main long-term risk is inflation. Unnecessary rate cuts would eventually overheat the economy, eroding the value of consumer savings and income. This would force investors to demand higher yields on Treasury bonds to compensate for the added inflation risk, driving up the government's cost to service its debt.

The Bottom Line for Investors

The connection between government debt and the stock market is direct. As Treasury yields rise, these safer government bonds become more attractive relative to riskier assets like stocks. This can pull capital out of the equity market, putting downward pressure on prices.

Historically, the S&P 500 has often struggled when the yield on the 10-year Treasury bond climbs above 4.5%. With the current yield hovering near 4.2%, the market is already sensitive to factors that could push rates higher.

If President Trump successfully undermines the Federal Reserve's independence—or if investors merely believe he has—the fallout could be swift. The result would almost certainly be a volatile market and a sharp, significant drop in stock prices.

Bank of England policymaker Alan Taylor has signaled that UK interest rates should keep falling, citing an improved outlook for inflation.

In a speech delivered at the National University of Singapore, Taylor stated that the central bank’s 2% inflation target is now likely to be reached by mid-2026, a significant acceleration from the previous forecast of 2027.

Inflation Outlook Drives Policy Shift

According to Taylor, the improved inflation trajectory is sustainable due to cooling wage growth. This has boosted his confidence that monetary policy can return to a neutral stance sooner than previously expected.

"Interest rates should continue on a downward path," Taylor remarked, adding the condition that his outlook must continue to align with incoming economic data, as it has over the past year.

Context from the Monetary Policy Committee

This perspective aligns with Taylor's recent voting record. He was one of the five members on the Bank of England's Monetary Policy Committee (MPC) who voted in December to cut the benchmark interest rate from 4% to 3.75%.

The decision was not unanimous, however. The other four members of the committee voted to keep borrowing costs unchanged, highlighting the ongoing debate within the central bank about the appropriate path for UK monetary policy.

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France risks entering a fiscal "danger zone" with international lenders if its budget deficit surpasses 5% in 2026, according to a stark warning from European Central Bank policymaker Francois Villeroy de Galhau.

"I must say with some seriousness that with a deficit of more than 5%, France would be in the red zone, in the danger zone as far as international lenders are concerned," Villeroy said during an interview with BFMTV.

Figure 1: Bank of France Governor Francois Villeroy de Galhau details his concerns over the country's fiscal path.

Political Gridlock Weighs on Economic Growth

Villeroy, who also serves as the Governor of the Bank of France, highlighted that ongoing political uncertainty surrounding the budget is already costing the economy at least 0.2 percentage points of growth.

Despite these headwinds, he noted that the French economy, the second-largest in the eurozone, is demonstrating resilience. Citing the Bank of France's latest business sentiment survey, Villeroy stated that growth for the full year of 2025 is projected to be 0.9%.

Budget Deadlock Sparks Fiscal Concerns

The fiscal warning comes amid a tense political backdrop. French lawmakers failed to pass the 2026 budget by the end of last year, which necessitated the implementation of emergency stop-gap legislation.

Although legislators resumed their review of the budget on Tuesday, there is widespread speculation that the government may need to invoke special constitutional powers to bypass parliament and ensure its passage.