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Hello and welcome to World Business Report from the BBC World Service.
I'm Roger Hearing and on this edition, how important is Moscow's acceptance of a ceasefire in attacking energy plants in Ukraine?
Germany's parliament votes to loosen government debt rules to allow big spending on defence and infrastructure.
An Italian newspaper produces a notation entirely written by artificial intelligence.
What does this mean for human journalism?
And the production house behind some of Hollywood's biggest recent hits gets bankruptcy protection.
Whatever happened to Village Roadshow?
But first, what's emerged from the phone call between President Trump and his Russian counterpart, Vladimir Putin, is not quite the ceasefire that Washington and Kiev had put on the table.
There has been talk about progress towards a comprehensive piece, but in concrete terms, Moscow has only backed a mutual pause on attacks on Russian and Ukrainian energy infrastructure.
Ukraine's power plants have been the subject of missile assaults since the beginning of the war.
So how welcome would such a pause be?
I asked Alexander Karchenko, managing director of the Energy Industry Research Center in Kiev.
Let me say that it's not enough information even to understand what is the result of this discussion.
It's very theoretical, promising, but right now we have an alarm in Kiev, we have an attack in Kiev and some region around the Kiev.
And I will have no surprise if after ten minutes I will have a message from my colleague from one one generation station or high voltage substation Today I'm under attack that I don't trust to any wars.
I will wait for a real action OK, but if in as a result of this there is a ceasefire in terms of hitting energy infrastructure Will that improve matters for Ukraineans?
Will it mean that electricity is more available?
Let me say first of all that it will improve dramatically situation for Russia where it under our attack to their oil and gas infrastructure and oil refineries they lost a lot of capacity as well.
From our side Ukraine managed to move through this winter time.
Winter is already finished.
Everything was okay.
We don't have outages for our households.
Yes, we have some limitation of power supply for business, but not for households at all.
And it is under huge attacks.
Like, they try to take at minimum 60 big waves, 100 -plus missile and droids attack to energy infrastructure, without big success.
What you're saying is it will make very little difference, in fact, for Ukraine.
In fact, right now, yes.
For Ukrainians, we already adopt.
We know how to fight against this attack.
We know how to restore our energy supply in very fast track, we know what to do and how to do.
We have huge support from many European countries to our energy with funding and resources we need to restore our power supply in fast track.
And we have unique experience, yes it's a bad experience, but it's unique and we already have it and we know how to manage all these strikes and we know how to supply our consumers power, even in a very complicated situation.
But you are saying that with businesses, there have been some disruptions recently.
Will it be possible now to rebuild those power lines or whatever has been attacked so that actually things do improve perhaps within this 30 -day period?
If it will be a real, real ceasefire, if it will be really, absence of attack, of course it will help.
It will help us as well to restore our power supply to business, to restore our generation capacity, to make a good progress with new project which we already started a lot in Ukraine, to build a new kind of generation.
That it will give us some bread for sure, but from other side don't say that it's a huge favor for Great Russia to someone.
It's because Russia's of power attack as well.
At the moment, as we sit, Alexander, are we saying that in Ukraine, there is enough power for people and for business and that the system, although damaged, is functioning pretty well.
Let me open just a second.
I opened on my computer the map of Ukraine with energy supply.
And we have no any outages at the moment.
That country is absolutely powered by electricity, no one is out.
So that's interesting.
Because but because as you said, there have been a tax but they haven't been effective.
Yeah, first of all, we already has a very good strategy, how we coordinate our energy infrastructure and air defence.
So what our energy how we defend our energy infrastructure with fortification with electronic warfare, how we maintenance our Um infrastructure when it's damaged that we already adopt.
Yes, we have a lot of losses.
We lost a lot of generation capacity we Restore our high voltage power at minimum five times in these three years Like if you will take all together But same time we have good understanding how to find the gains this attack in there very far from Efficient and absolutely sure that they spent This winter time, just in this winter time, they spent more than 1 ,000 of missiles and drones exactly targeted to energy system and they have no result.
No any blackout, yes little limitation for business but nothing unresolved.
Everything doing well as for the circumstances.
And that was Aleksandr Kachenko of the Energy Industry Research Centre in Kiev.
Now, Germany's taken a major step in its post -war history.
There's been a national aversion to building up state debt.
And a debt break had been part of the country's basic law, restricting Germany's structural deficit—today more than 0 .35 percent of its annual GDP.
Well, now the German parliament has voted to exempt defense spending from that, so the country can borrow far more for armaments and infrastructure.
Here is the moment the measure passed in the Bundestag.
The Bundestag voting on that measure, will the debt break was part of what led to Germany being seen as one of the world's safest bets for investors?
So will this change now?
I also know Germany's leading bankers Jurg Kramer chief economist and Head of Research at Commence Bank.
Well it's a good thing as far as that we have more money for defense and this is absolutely necessary when you think of the threats stemming from Russia.
That means this is what what I like.
It's also good that we have more money for infrastructure but the critical thing is how these increase is financed and it's not financed not even partly by savings in other parts of the budget but it is entirely financed by more debt and the sovereign debt to GDP ratio of Germany will move up from 63 % last year to about 90 percent in 10 years and this is a huge change in the fiscal trajectory of Germany.
And is it then a risk because Germany has historically had this very strong relationship with debt er, keeping debt to a lot to a very low part of what's going on and that's for good historical reasons.
Now will this perhaps threaten the confidence of international investors in Germany?
Well, Germany is not Greece.
That means this is not a threat in the sense that Germany will no longer be able to find fresh money from institutional investors.
This is not the point.
However, in the week where this package was published, the yield on ten -year German government bonds increased significantly.
It was the sharpest increase since the start of the 90s and this is a reminder that investors are aware that something has changed as far as a debt outlook for Germany is concerned.
The real risk is that they go forward. A larger share of the budget in the future will be spent on interest payment and this lowers the room for maneuver for future government and this also means that there is a risk that in the future taxes will be raised to service the debt.
As a banker yourself you know that the importance I suppose of balancing debt with benefit and I suppose some people I would say that the amount of money going into defense, obviously to protect Germany, but also going into an infrastructure fund to improve the way in which the economy can work, that all that makes sense in terms of taking on new debt.
Of course, it makes sense to have more money, to spend more money on defense and to spend more money on infrastructure.
The point is, in the end the resources are limited.
Germany is an economy with a lack of skilled labor, and if you finance everything entirely by new debt, then a debt -induced increase in aggregate demand will be met by an economy operating at full capacity already, and And therefore a good part of the increase in spending in investment will lead simply to higher prices and not to an increase in a price adjusted GDP.
So would you have advised the incoming government against this?
Would you say to incoming Chancellor Metz this is actually not a wise move?
In the end, it's all about making priorities.
and you can't finance everything at least not with an economy which has a lack of skilled labour and the share of working -age population is declining both in the United States, in Europe, and in China and we are no longer in the 70s and 80s where we had under utilization of the economy and where you can simply increase debt, increase spending, and can expect to have a positive impact on the economy.
This is no longer the case.
This is the issue. This will, in the end, lead to higher inflation.
Is it also an issue that the new money coming into the system may not be used as it should be because many people complain about the bureaucracy in Germany that perhaps moving towards better infrastructure may not work just because of that?
I think one criticism of the whole approach is that money cannot solve each and every problem.
And when it comes to infrastructure investment, of course, when you raise the amount of money available, this does not solve the problem that we have very bureaucratic, mighty here approval procedures which will prevent the government simply from spending the money they borrow.
Or think of the mighty erosion of the competitiveness of the German economy this is not only caused by the bad state of public infrastructure it is also caused by the fact that corporate taxes are much higher than in other countries.
For another example is energy.
Energy is very expensive in Germany.
Or bureaucracy. General bureaucracy is a big pain point for the corporates.
That means, yes you can borrow more money but you also have to improve the supply side of the economy and to tackle all the pain points under which many companies are suffering.
And this is not happening, it's simply because the government made up of Christian Democrats and Democrats, have a different understanding of how to improve the competitiveness.
Jürg Kramer there of Commerce Bank.
You're with World Business Report from the BBC.
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Ross, thanks so much for being with us.
And now stocks have been falling.
We've seen a lot of movement in the last three or four weeks, but they do seem to be taking a bit of a dive at the moment.
And many people are saying, well, that's because the Fed is coming up with a decision on interest rates tomorrow.
Well, I hate to say it, but the Fed isn't really going to do anything.
It has a lot more to do, I think, with US policy and an overvalued stock market trying to correct a much more reasonable valuation.
We see stocks in other areas of the world like Europe going higher.
Yeah, and it's interesting, I suppose perhaps more what the Fed says rather than what they do, because they're obviously going to make their prognostications about which way the US economy means tending right and what they're probably going to say tomorrow is it's too early to tell what effects on the economy these policies are going to have so we're gonna wait and see the data which is what they've been saying for years so we really just don't expect much from the Fed tomorrow nor will I think that it matters much for investors on the short term but on the long term lower interest rates is really an advantage
the Fed has if the economy weakens to keep it from really falling into a recession now what about individual companies.
Nvidia, interestingly, is certainly one of those that's been dropping a bit, and Alphabet, now that's the parent company, of course, of Google, and they've taken over the cloud security platform with so what's going on there?
Well, this, I'm actually really happy about the acquisition.
And you just mentioned what I think are the two best values to buy if you're looking to buy stocks that are large cap tech, and video idea being the cheapest and the fastest growing of the group, as far as its overall growth to value ratio.
And then Google has a very low valuation today, making a bid for whiz.
And really looking at the long -term for AI and cloud risk from cybersecurity and making a big investment into, I think, a very good firm to add value to the Google Cloud system.
Now, what about Tesla in all this?
Because that's been another one that's been down.
And of course we'll have been contrasting that with the Chinese EV company, BYD.
Right, and it's really hard to compare them because they're quite different companies, but if you're just looking at the EV business, you know, BYD is starting to eat Tesla's lunch, especially the emerging markets, and in China, and not to mention other Chinese competitors that are getting really, really tough, based off learning over the last several years from Tesla itself, so Tesla's seeing some real competition in all of its markets, and not Not to mention the European EVs are quite good now from Mercedes and BMW.
So Tesla isn't a one horse show anymore and on top of all the issues that Elon's causing, there's real competition.
Yeah, and with BOD as you say, moving into that space, this isn't really going to be a good thing in terms of what Donald Trump's talking about with tariffs and trying to make sure cars are made in the U .S. I mean, it seems to play a position at the moment where BOD have the feel to themselves.
Well you know BYD in a lot of ways does when you're looking at the emerging markets in the global economies.
You know Europe and United States are looking to protect our markets from low -cost Chinese EVs which I think they're gonna do.
Tesla you know obviously is in a great position globally if you take out the image issues as far as they manufacture on all continents so they can deal with tariffs better than other companies.
But the issue that they have is retaliation now Well, for the brand from the tariffs, you know, Trump putting on other countries.
And right. Finally, and briefly, I mean, what's been interesting?
I've saw a couple of charts during the day.
A lot of people are moving out of US stocks altogether.
I mean, is there something going on?
Yeah. I mean, we're recommending different allocation than we have over the last several years to our clients.
We've kind of take a look at the global landscape and the change in the US government, which we think is ultimately a negative for US securities and saying, Hey, look, you know, we've got overvalued U .S. stocks and then you've got Europe which actually I was listening to your last guest I agree with some of what he said but some of it I don't agree with which is I do think it's going to help the German economy to per German just spend more money and it gives Europe an opportunity to really step up their economies and be more efficient so we've been moving money out of the U .S. and into Europe
as well and I think that's going to be a trend so it's going to be a bit here at a time for Europe I think it'll be interesting to see.
Ross, thank you so much for being with us.
Ross Gerber there in Los Angeles.
Now, an Italian newspaper says, it's become the first in the world to offer a daily edition partly produced by artificial intelligence.
Four pages of entirely AI -generated content are included in Ilfoglio's latest broadsheet, and on its website, it's part of a month -long trial by the paper to highlight the impact of AI.
I mean, here's an article, for example, in which no human was involved.
Young Europeans, especially Generation Z, are moving away from traditional romantic love and preferring vague relationships and undefined situations.
Fear of rejection and emotional insecurity, fueled by economic and social uncertainties are pushing many to avoid stable commitments.
Well, I have to say, I think a human can easily written that.
But is the shape of things to come in the newspaper industry going to be dictated by AI.
Joining me now is Gina Neff, Professor of Responsible AI at Queen Mary University of London.
Gina, thanks for being with us.
Is this a moment then where, well, essentially, an addition like this is accurate enough not to need human journalists?
Well, that's the first question everyone wants to know the answer to, right?
I don't read Italian, so my AI -enabled translation tool on my web browser was how I knew what this article said, the point really is that many of us are using AI tools in our everyday life, whether or not we know it or not.
The news industry, however, the stakes are really high because the value of getting things right is absolutely at the core of what we expect from news.
So the accuracy is something that people are going to watch really closely on this story.
Well, you say it, but I mean, there's an awful lot of fake news out there of course, which we know already.
Are people actually that able to tell the difference between fake and real and to that extent could AI just build on that?
Well, a recent survey out of Oxford showed that, you know, in 47 news markets around the world, people are really uncomfortable with the idea that AI produces news.
At the same time, journal newsrooms are embracing AI tools because they look for more efficiency, they look for new kinds of innovative approaches to doing this.
So, there's a real gap between what people are expecting and needing from news and really the crisis that newsrooms are facing.
The question here, I think, going forward is going to be trust. Are newsrooms going to be able to maintain and keep that trust that they've established with their audiences?
Yeah. I mean someone say it's a gimmick.
I mean clearly Folio is putting this out there and telling us what it is.
But could you really say in in perhaps a year two years three years that we'll see a lot more of this There's great examples already of how AI is powering news in completely novel ways Swedish radio For example has great ways that they're using automated transcription that enables their journalists to search their own archives Several European news agencies are doing these really great things with automated translation allowing for more local and regional reporting to cross that language barriers.
And then there's new ways of reaching different audiences.
People will be familiar with how AI is powering news feeds in new ways.
But, you know, what we've got here is an example of generative AI being used to produce news and content - content, and I would say that raises real concerns for a lot of people.
But if - if these newspapers have to rely, obviously, on their income, we know a lot of people aren't very keen to buy.
They can see things for free on the net.
In the end, cost is gonna be where it is and AI is cheap.
Yeah. Well that's where we've got to be really careful in the news business, in particular, because these cost pressures are bearing down on the news industry.
Listen, one of the things that I think is so interesting about this particular story is that Infolio is producing this as a broad sheet, right?
They're literally producing an AI newspaper that they are also printing, which to many of us outside of the Italian market, where newsstands are still common, seems like an anachronism.
But, you know, BBC News, not to point fingers, BBC News ran into a clash with Apple Intelligence recently, where Apple Intelligence had these summaries that were just completely and utterly wrong.
And so we've got to be careful when we're talking about generating news because it's something the public says they're not quite ready for and it's something that really can damage trust from the news organisations.
Gina thanks so much for being with us.
Gina Deneff, Professor of Responsible AI at Queen Mary University of London.
Now Village Roadshow Entertainment, well that might not be a name that you immediately recognise but might have heard this before one of your favourite films?
Now, it's been one of Hollywood's biggest producers in fact behind films like The Joker, The matrix and Oceans 11.
After this, there is no turning back.
You take the blue pill, the story ends, you wake up in your bed and believe whatever you want to believe.
You take the Red Pill, you stay in Wonderland, and I show you how deep the rabbit hole goes." But despite all that success, Village Roadshow has now filed for bankruptcy protection, blaming its ongoing legal battle with its long time partner Warner Bros for its collapse, Village Roadshow's also conceded its ambitious push into producing independent films and television programs before the pandemic was unprofitable, exacerbating its financial woes.
Well, let's get more on all this from Meg James, senior entertainment writer at the Los Angeles Times.
He joins us now. Meg, thanks so much for being with us.
What went wrong for Village Roadshow?
Well, a whole host of things went wrong.
You're looking at the bankruptcy protection filing by a company that really founded a key part of Hollywood film financing.
Over the years, Village Roadshow would provide hundreds of millions of dollars to Warner Brothers to produce some of the best films including the one that you just played.
But over time the relationship soured and as you pointed out Village Roadshow made a very untimely decision to ramp up original production.
But at the same time they have as you said been behind a lot of quite big money making films, movie franchises, Joker for example, you know, there's been a recent sequel there.
So isn't the money coming in from that?
Yes, there is money coming in.
In fact, according to the bankruptcy petition, they're making about 50 million dollars a year just on royalties and some of the proceeds from the bets that it made years ago, some of these big films. But the money isn't enough?
not enough for what they were trying to do.
And actually what happened too was also a cautionary tale about how Hollywood's economics have really been scrambled by the pandemic and also the shift to streaming.
What happened was in 2021 Warner Brothers decided to, instead of just releasing the matrix resurrections into theaters, it would also release it the same day on a streaming service.
Well, the box office, the ticket sales for the movie, it was a huge flop in part because people could stay home and watch it for a much lower cost. So they've been battling with Warner Brothers over this film release strategy and as it turns out, they've spent $18 million on legal fees and it's been three years, there's no end to cite that lawsuit.
So briefly then, Village Roadshow essentially is a victim of our changing habits of watching things at home.
Is that the right way to put it?
Precisely. That's a wonderful way to put it.
It's one of the many casualties that we're starting to see pile up here in Hollywood as the media companies race to be the distributors of their own content.
So fewer people going to cinemas overall.
Yes. I mean, we've seen it at Uptick and ticket sales.
There's been just recently, and we're waiting for a very controversial Disney film to come out.
Ah, yes. That statement's no white.
We'll see where that comes and whether they get us in.
Meg, thanks so much for being with us.
Meg, James. Thank you, Roger.
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