Italy's Central Bank Chief Backs Digital Cash, Not Stablecoins

Futures rise

Trump to speak at Davos

Netflix’s “mixed” earnings

Berkshire Hathaway may shed Kraft Heinz stake, filing shows

Gold jumps above $4,800

Source: investing

UK Prime Minister Keir Starmer has publicly stated he will not yield to Donald Trump’s demands regarding a potential U.S. acquisition of Greenland, escalating a diplomatic rift between the two nations. Starmer asserts that the U.S. president is leveraging a separate deal over the Chagos Islands to pressure Britain into compliance.

UK Prime Minister Keir Starmer addresses the diplomatic dispute over Greenland, stating his government will not yield to U.S. pressure.

Greenland at the Center of a Trade Dispute

The conflict ignited after Trump threatened to impose tariffs on Britain and other European countries unless a deal for the U.S. to purchase Greenland was reached. In response, Starmer initially called for a "calm discussion" on Monday, signaling a desire to avoid a trade war.

However, the Prime Minister has since hardened his stance, making it clear that Britain’s position is not for sale.

"I will not yield, Britain will not yield, on our principles and values about the future of Greenland under threats of tariffs, and that is my clear position," Starmer told lawmakers. He added that the Danish prime minister is scheduled to visit London on Thursday to discuss the matter.

Starmer emphasized that the future of Greenland must be decided by its own people and by Denmark.

Chagos Islands Deal Becomes a Pressure Point

The diplomatic tension intensified when Trump abruptly reversed his administration's position on a UK agreement concerning the Chagos Islands. The U.S. had previously supported the deal, which involves ceding sovereignty of the Indian Ocean territory to secure the future of a joint U.S.-UK air base. On Tuesday, Trump described Britain's move as "stupid and weak."

Starmer framed this sudden criticism as a deliberate tactic. He argued that Trump's change of heart was directly intended to force his hand on Greenland.

"President Trump deployed words on Chagos yesterday that were different from his previous words of welcome and support," Starmer explained. "He deployed those words yesterday for the express purpose of putting pressure on me and Britain."

Navigating a Critical US-UK Alliance

Despite his firm opposition, Starmer has consistently worked to maintain close ties with the Trump administration to protect vital trade and security interests. When pressed by lawmakers to take an even stronger stand against the U.S. president, Starmer cautioned against severing the relationship.

He stressed the importance of continued cooperation with the United States on global security issues, including the situation in Ukraine.

"That does not mean we agree with the U.S. on everything," Starmer clarified. "But it is foolhardy to think that we should rip up our relationship with the U.S., abandon Ukraine and so many other things that are important to our defence, security and intelligence."

Source: reuters

India's economy is demonstrating powerful growth momentum, according to the Reserve Bank of India's latest "State of the Economy" report. The central bank's analysis points to robust overall demand and sustained economic activity, providing a basis for optimism despite global uncertainties.

Key Drivers: Demand and Production Rebound

High-frequency indicators, including Goods and Services Tax (GST) receipts and e-way bills, confirm that the economic engine is running strong. This expansion is being fueled by a combination of factors:

• Reviving Rural Demand: Economic activity in rural areas is picking up, partly boosted by GST cuts that have spurred broad-based growth in retail automobile sales.

• Gradual Urban Recovery: Demand in urban centers is also on a steady path to recovery.

• Industrial and Service Sector Strength: A solid rebound in the manufacturing sector and continued buoyancy in services are set to drive growth in gross value added.

RBI and IMF Align on Bullish GDP Projections

The RBI's outlook remains positive. The central bank projects GDP growth will hit 7.3% for the fiscal year ending March 31, 2026. For the subsequent fiscal year, growth is forecast at 6.7% in the first quarter and 6.8% in the second.

This optimistic view is shared by the International Monetary Fund (IMF), which recently revised its growth forecast for India upwards by 0.7 percentage points to 7.3%, citing the country's strong momentum. However, the IMF anticipates that growth will moderate to 6.4% in the following two fiscal years as cyclical tailwinds fade.

A Closer Look at Recent Performance

Economic activity in December was particularly strong. The generation of e-way bills saw a healthy expansion, supported by GST rate rationalization, end-of-year stock clearances, and corporate efforts to meet sales targets.

Furthermore, the growth in GST revenue collections during this period was primarily driven by higher receipts from import-related taxes.

Mitigating External Risks Through Diversification

While the domestic picture is bright, the RBI report acknowledges external sector risks, particularly the threat of potential tariffs from the United States. In response, India has intensified its efforts to diversify and strengthen its export markets to build resilience against global economic pressures.

Australia is on a collision course with a rapidly growing national debt unless the government takes decisive action to overhaul its tax system or slash spending, according to the Organization for Economic Co-operation and Development (OECD).

In its annual economic assessment, the OECD issued a stark warning, urging a "greater sense of urgency" from policymakers. With federal and state budgets projected to remain in deficit for years, compounded by the pressures of an aging population and an expensive energy transition, the organization cautioned that Australia's public finances are on an unsustainable path.

Without a major fiscal adjustment, the report forecasts that Australia's budget deficit will widen, pushing the national debt-to-GDP ratio onto a "steep upward path."

A Blueprint for Tax System Modernization

The OECD laid out several key reforms to boost government revenue and stabilize the economy. The recommendations target consumption, property, and the resources sector, aiming to shift the tax burden away from personal income.

Key proposals include:

• Property and Fuel Levies: Increasing recurring taxes on housing, which the OECD notes could help cool home price growth and ease cost-of-living pressures.

• Consumption Tax Overhaul: Raising the Goods and Services Tax (GST) from its current 10% rate—a figure considered low by international standards—and applying it more broadly.

• Resource Sector Revenue: Boosting taxes on the resources industry to capture more income from royalties.

The report suggests that these changes would create a more growth-friendly tax environment. However, Australia's tax framework is widely seen as a relic of the 20th century, failing to effectively tax the economy's fastest-growing areas.

The Political Challenge of Reform

Meaningful tax reform has long been a politically dangerous topic in Australia. Lawmakers often fear voter backlash, a sentiment rooted in past failures. In 2010, a previous Labor government's attempt to introduce a mining tax during a commodity boom contributed to the downfall of a first-term prime minister.

Since then, few significant reforms have been attempted. The OECD notes, however, that Prime Minister Anthony Albanese, re-elected in a landslide last year, is now in a strong position. A second-term government is traditionally seen as the ideal time to pursue difficult but necessary reforms.

Currently, Australia's underlying cash deficit is forecast to be nearly A$37 billion ($25 billion), or 1.3% of GDP, for this fiscal year. Projections show the annual deficit narrowing only slightly to 1.1% of GDP by fiscal 2029.

A Diverging View on Interest Rates

The OECD's report also touched on monetary policy, offering a different perspective from the Reserve Bank of Australia (RBA). According to the OECD, the RBA's own models estimate the neutral interest rate is currently 3.1%, which is half a percentage point below the central bank's current 3.6% cash rate.

While RBA Governor Michele Bullock recently signaled that the next rate move could be a hike due to persistent inflation, the OECD suggested a different path may be possible. It argued that if the labor market continues to soften and inflation returns to the RBA's 2-3% target range, "policy settings could be eased modestly further in 2026."

However, the organization also acknowledged the recent upside surprises in inflation data. It endorsed the RBA's current "data-dependent and flexible approach," a stance that has led many economists to expect either a prolonged pause in rate changes or another hike if price pressures intensify.

With the RBA's first meeting of the year scheduled for February 2-3, upcoming quarterly inflation data could prove decisive. Currently, money markets are pricing in approximately a one-in-three chance of an interest rate hike next month.

U.S. Energy Secretary Chris Wright has told oil executives that Venezuela's crude production could increase by 30% in the short- to medium-term. Speaking at a private meeting in Davos, Switzerland, he projected output could rise from its current level of 900,000 barrels per day (bpd), according to three executives who attended.

The closed-door discussion took place on the sidelines of the World Economic Forum and follows the recent capture of Venezuelan leader Nicolas Maduro by U.S. forces.

Figure 1: U.S. Energy Secretary Chris Wright, who outlined the potential for a near-term increase in Venezuelan oil production during a private meeting in Davos.

White House Sets Sights on Venezuelan Reserves

Reviving output from Venezuela, which holds the world's largest oil reserves, is now a primary goal for U.S. President Donald Trump. His administration plans to control the country's oil resources indefinitely through a $100 billion plan aimed at rebuilding its oil industry.

On Tuesday, Trump stated that his administration has already taken 50 million barrels of oil out of Venezuela and is selling some of it on the open market.

Earlier this month, Trump met with over 15 oil executives at the White House. During that meeting, Exxon CEO Darren Woods noted that Venezuela would need to amend its laws before it could become an attractive destination for investment.

Industry Skepticism and Structural Hurdles

Despite the administration's goals, oil analysts and industry executives remain skeptical about a rapid recovery for Venezuela's oil sector. They argue that the country's degraded infrastructure requires billions of dollars and several years to rebuild after a long period of under-investment and sanctions.

Venezuela's production capacity has collapsed over the decades. In the 1970s, the nation pumped 3.5 million bpd, accounting for 7% of global supply. Today, its output represents just 1% of the world's total.

Furthermore, Venezuela's oil reserves are among the most expensive to develop globally. Its crude is exceptionally thick and heavy, demanding specialized equipment for extraction, transportation, and refining into usable fuels.