In journalism, you come across a lot of rumours. The golden rule is that you should ignore all of them until they are officially denied. What happened yesterday is that the Elysée Palace and the chancellery in Berlin gave us an opportunity to talk about whether or not our leaders have a drug addiction. Great work!

This absurd episode could not have happened in the US, or China or Russia, because they are exercising some professionalism about the images of their leaders. Of course, it helps, if you only have one leader, not four. They don’t let photographers walk into their railway compartment to take a snapshot.

For us, the most disturbing aspect of the pictures was not the handkerchief or the spoon, but the ways the leaders interacted. Emmanuel Macron clearly looked like the boss. Keir Starmer and Friedrich Merz looked like people keen to please the boss. And Donald Tusk looked like someone who would rather be somewhere else. We know that snapshots can distort reality just as much as AI can. Remember the one about Angela Merkel appearing to push back against Donald Trump during a Nato summit? The difference then was that she chose that picture to portray an image of her standing up. It was a lie of course, but still, it was successful political marketing. This is mercifully not our business. But the photo of the four leaders having a good time on a train is not one we would have disseminated.

For starters, this is not a picture of a united Europe, but of four guys in a train. These four countries are Ukraine’s most important supporters. They represent four members of Nato, but they don’t speak for Nato. The UK is not in the EU. Poland is not in the euro area. The image of unity is very much at odds with known facts. This episode leaves us with the impression that the Europeans are struggling to be recognised as important, when the real actors in the upcoming peace talks are the USA, Ukraine, and Russia. This is not a great image. 

There is a familiar pattern in UK immigration policy. Something that one government does leads to a lot more immigration than they expected. Then there are successive promises to restrict immigration as quickly as it rose. These promises aren’t fulfilled, and the process eventually repeats. Each time, the irreconcilable political issue – the public’s desire for less immigration, versus the British economy and public sector’s increasing dependence on it – grows.

Now, we look to be at the promising end of the cycle once again. The British government will release a new immigration white paper, outlining its proposed policy approach, today. This has been heavily trailed in the media, and we have a good idea of what some of the most significant proposals will be.

They include lengthening eligibility periods for permanent residence from five years to 10, and introducing language requirements for dependents of foreign workers. But the most significant, and difficult-to-implement, proposal will be ending foreign recruitment of care workers. In 2023, almost half of all new care workers in the UK came from abroad.

By ending foreign care worker recruitment, Labour is arguably trying to tackle a problem that came and went. The big surge in people coming to the UK on care worker visas took place in 2023, when almost 146,000 visas were issued for main applicants. Last year, however, the numbers were much lower, more like 27,000. All visas for health and care workers, plus families, dropped from 348,000 to 111,000 over that time period.

The most plausible explanation for the big rise in overall migration to the UK that took place over that time period, from 2021-23, is a coincidence of two factors. One is a sudden change in visa rules, which happened at the same time as the end of free movement to and from the EU. The other was the end of the Covid-19 pandemic. People who had postponed work or study abroad because of pandemic-era restrictions could move again, and did.

Because this was a one-off, what we’d expect is that net migration to the UK would fall on its own. This is what is already happening. Net migration to the UK in the year to June 2024 was 728,000, very high in historic terms, but a 20% decrease from the previous year. Changes introduced by the previous government, namely a ban on graduate students bringing dependents to the UK, also contributed to the drop.

The risk for Labour is that the proposals end up overcooking it, especially on care workers. Because of this, what you could have are warnings that the sector may collapse without foreign workers, prompted by backtracking. Then you have a policy shift, and U-turn, that pleases nobody. Rather than heading off Nigel Farage’s Reform party, the big threat to Labour and the Conservatives alike, you increase the salience of immigration as an issue. That plays into Farage’s hands.

Labour’s bigger problem, and the UK’s, is a lack of a post-Brexit economic model. Reliance on foreign workers, and students, is downstream of that, and will not be resolved unless that is. But the pattern since the global financial crisis has been to treat the symptoms, and not the underlying cause.

There are two concentric geopolitical circles that have China and the US in it: one is relations between Russia and China that have become closer since the war in Ukraine and Donald Trump separating these two by appealing to one of them and threatening the other. The other circle is how the escalating conflict between Pakistan and India involves both China and the US. How far this conflict will go is hard to tell. But if this were to end up in a fully-fledged war, China and the US may find themselves on opposite sides there.

Xi Jinping is in Moscow for several days for a Russia-China summit and will be the star guest for the World War II commemorations. Xi seemed the more assertive of the two, telling Putin that they should be friends of steel and taking the cooperation to the next level to counter bullying from the US. Putin said that they stand together against neo-Nazism. Both countries pledged to intensify their relations including military ties and to coordinate their response to Washington’s dual containment strategy.

Looking at the bilateral data made available by six research institutions in Sweden, Germany and Poland, we can clearly see how the relationship grew after the invasion. In 2024, total trade between Russia and China reached $245bn, more than double that of 2020. Trade in dual-use goods and energy had been going up, and the Chinese yuan has been increasingly used in bilateral trade. It also maps the increase in joint military exercises and shows a steady increase in Chinese exchange students in Russia. This is there to continue.

Another fault line in geopolitics are the two nuclear powers, India and Pakistan, which both have a long history of conflict with each other. There were hot incidents in the past, but this time it is different, due to the change in alliances. The New York Times looked at what happened on the military side. India used to get most of its arms from Russia, but increasingly does so from the west, France in particular. India also buys more from the US. Pakistan, whose relevance for the US waned since the end of its presence in Afghanistan, has turned to China for its military equipment. Now the US and other western nations display their good relations with India, while China increased its patronage over Pakistan. India and China themselves have clashed several times over border disputes. This is an explosive cocktail which could draw western countried into the conflict in South Asia.

While the Europeans are not as crude as Elon Musk, who is about to exit his role as a head of the Department of Government Efficiency, they are doing something very similar. De-bureaucratisation has nothing to do with simplifying forms. It has only very little to do with efficiency. It does not help flying in top executives from McKinsey and Boston Consulting. The experience of having business executives as economics and finance ministers has generally not been a success. Or that of economists for that matter. They all focused on efficiency.

The US think tank Foundation for American Innovation found only two episodes in US history, in which efforts to improve the efficiency of government succeeded. One was the Cockrell Commission in the 1880s, the other was Al Gore's Reinventing Government programme in the 1990s that led to a reduction of 400,000 government employees. It is always good to do things more efficiently than less efficiently. And these programmes succeeded on their own terms. But we have to remember that the costs of running the government is a small fraction of total government spending. It should not be on our top-3 list of things to do.

If the US administration were really serious about bringing down the government deficit, the declared goal, they should focus on raising taxes or cutting programmes. The latter is about politics, not efficiency. Ursula von der Leyen should not focus on make forms easier to fill out. The problem with EU regulations on tech for example, or corporate governance, is not the forms, but the regulations themselves. The main problem with GDPR, the grand-daddy of the EU’s tech regulation, is not how it is implemented. It is the regulatory philosophy that stands behind it. It assumes that companies are abusing data and it seeks to protect consumers against abuse. If the EU were serious about AI, it would change the regulation from the ground up, and recognise data as a business sui generis. The job of GDPR should be to make data secure, and to ensure a fair competitive environment.

It is a category error to think that the problem with bureaucracy is the bureaucrats. It is the regulations they apply.

One of the tragedies of Italian politics is what its leaders often do with power. Instead of spending their political capital on necessary reforms, they often try to change electoral laws, or the political system, to cement their own power. This usually backfires, either because they face a popular backlash, or because their opponents often get the upper hand through the system they created.

Now it looks like this Italian government may repeat the same mistake. Giorgia Meloni’s administration is the most stable one in Italy for decades. But that does not seem to be enough for her. She has already said she wants to make Italy’s premiership directly elected. What the electoral law might look like, however, was left to be decided later.

It seems like the government might be starting to flesh this out, however. In an op-ed for La Stampa, Alessandro de Angelis says the government is considering a completely different electoral system. Under the current one, dubbed the Rosatellum in Italy, each chamber is elected with a combination of proportional seats and first-past-the-post. This is the latest of a series of changes to the electoral law since the end of the so-called first republic in the early 1990s, shown in the table below.

At the moment, Italy's electoral system rewards the right, because it has united into one coalition, whilst the mostly left and centre-left opposition is divided. But the problem for the government is that if the opposition does unite, this could leave them vulnerable, particularly in the south of Italy.

The alternative that they are considering, according to De Angelis, is a proportional system, but one with a majority bonus. A party or coalition that comes in first and surpasses a certain threshold, in this case 40-42%, would win 55% of seats in both houses. This is similar in philosophy to, but slightly less complicated than, the system in place in Greece today. Each party or coalition would also have its prime minister-candidate’s name on the ballot, another significant change.

Meloni is, so far, politically untouchable. But this kind of meddling is where she may stumble. It tends to produce a backlash when you try to concentrate power, or tilt the system to your own ends. Matteo Renzi, who was also popular before his ill-fated attempt at constitutional reform, found this out the hard way.

Even if Meloni does succeed, a system like this which works for you could easily work against you. When Italy’s first modern-day electoral reform came into place in 1993, we doubt anyone thought at the time that it would lead to Silvio Berlusconi becoming the longest-serving Italian prime minister. A system designed to give the right solid majorities could benefit the left if it manages to prevail by even the tiniest margins.

The Israeli government issued a new ultimatum: if no hostage deal during Donald Trump’s visit to the Middle East next week, Israel will commence with a massive ground operation to reoccupy and flatten any building still standing in Gaza. A hostage deal would be the preferred option. But if this operation were to start, it would draw the US into the ugliest of wars.

Benjamin Netanyahu and his cabinet have rejected any proposal that would end the war entirely. They want a short ceasefire to exchange some more hostages, insisting on total victory over Hamas. His cabinet counts on the threat of an all-out invasion to put pressure on Hamas to accept a deal on Israel’s terms, and on Palestinians in the new humanitarian aid zone to leave Gaza. Such a forceful intervention will certainly not end terrorism.

According to Axios, the Israeli security cabinet approved a plan that foresees a ground invasion into Gaza with four or five armoured and infantry divisions. It includes the displacement of nearly all of the 2m people in Gaza to a small area where a new US-Israeli foundation and private US companies would manage security and aid delivery. The UN and all aid organisations already said that they won’t be part of this.

Trump’s roller-coaster on Gaza handed power over to Netanyahu, who could do what he wanted without any pressure from Washington. Trump made a big splash when he entered office with his push for a ceasefire before his inauguration but three months later the situation is much worse in Gaza. Next week Trump will travel to Saudi Arabia, Qatar, and United Arab Emirates. The talks were meant to focus on bilateral issues and investment, but now Gaza will intrude. Will Trump and the Arab states get Hamas to agree on a hostage deal under these conditions? Hamas will never surrender; it is the only resistance they have left. Without a plan towards peace, they won’t budge.

Haaretz writes that the occupation plan is taken straight out of the Iraq War play-book. The Iraq war turned into a total disaster for the US and the neoconservatives that backed it. Does Trump and his team not see the parallels in Gaza or will they confront Netanyahu?

If Israel were to go ahead with its plans, there would be two million Gazans cramped into a compound surrounded by barbed wires begging for food, which is dished out by US companies. Such a scene provokes flashbacks of US contractors operating in Iraq to separate local population from terrorists. The US had no clear exit strategy for Iraq and US contractors were later held responsible for human rights abuses in Iraq. Remember that it was Netanyahu who flew to Washington in 2002 to tell Congress that toppling Saddam would have enormously positive effects on the region. Two decades later, Netanyahu promises the end of Hamas terrorism with the same strategy.

Across most of Europe, 1 May is Labour Day, a public holiday. It is an occasion for politicians to make speeches about the various wonders they are performing for workers and the economy. One might think that in Italy, there is good news for the government to shout about. This week, Italy’s quarterly growth statistics showed a stronger than expected 0.3% GDP growth rate. Perhaps just as, or more, positively, industrial production also ticked up, and was a driver.

But this is a short-term occurrence. The data are very noisy now because of how firms anticipate the impact of US tariffs. If you look at some indicators of the longer-term situation, the signs are less encouraging. One is emigration. In the EU’s single market, workers are capable of voting with their feet. This is especially true of the most skilled.

On this, Federico Fubini wrote an excellent piece earlier this week. According to Istat’s official records, 191,000 people left Italy last year. Of these, the vast majority, 155,000, were Italian citizens. It is a new record for emigrations, and a 23% rise on 2023’s figures, following a trough in exits due in large part to the pandemic.

There are a couple of other aspects of this that should be worrying if you are Italian. One of them is that it is highly likely that these figures are an undercount. In 2023, for instance, the Swiss statistics office recorded 50% more Italian arrivals in the country than Istat did. Germany, similarly, recorded more than twice as many arrivals as Istat did for the year.

Another is that these people are often leaving not from Italy’s traditionally poor and unemployment-riven Mezzogiorno, the country’s south. In 2024, close to one in two hundred of Veneto’s residents left the country, and that is according to the probably underestimated Istat data.

Veneto’s unemployment rate the year before that was 4.2%, well below the national average. If you are a Venetian firm, your problem is not too many candidates chasing too few jobs, but a lack of workers. This is especially true for skilled workers. It is one of the direct, and tangible, effects of emigration.

Aside from this, however, emigration is also an indirect indicator. It is a vote of confidence, or non-confidence, in the economic and social situation of a country from those who are most capable of going elsewhere. This is sending the Italian government a warning. Italy’s structural problems remain unresolved. Until they do, we expect more people to continue seeking opportunities elsewhere.

Weather metaphors rarely match, but when Belgian customs officers in Liège tell Bloomberg that they are drowning amidst a tsunami of small parcels under €150 that enter the Single Market free of duty, this does not look like an exaggeration. Last year there were 4.6bn such small parcels entering the EU, the equivalent of about 145 packages per second. More than nine out of ten come China, from e-commerce giants like Temu, Shein, or AliExpress.

Tomorrow the US will end its duty free allowance on parcels under $800. Will this mean that even more small packages arrive in Europe? How will airports, ports and customs duties cope with such an avalanche?

Within just a few years, Shein and Temu have established themselves as the leading e-commerce platforms in France and across Europe. Shein offers mainly ultra-trendy, low-cost fashion. Temu sells a wider range of products including textiles, toys and high-tech gadgets. Together with Amazon, they account to a quarter of online fashion sales in France. And over 70% of the French above 15 have bought at least once from Shein or Temu in the past 12 months, according to Delano magazine, as French consumers increasingly turn to low cost-fashion to save money. This has caused losses to the traditional sectors, such as clothing (5.2% of its turnover), cosmetics (4.8%) or the toys industry (8.7%). Some of their products are counterfeits, and others do not comply with EU safety provisions. But with such a flood into the EU market, who is there to control this?

France spearheads the efforts, and wants EU countries to rapidly agree on introducing a handling fee on small parcels that would allow their customs duty officers to do their job. Rapidity is not really a characteristic of the EU. In its proposals in 2023, the European Commission suggested to end the duty-free access to parcels under €150 in 2030. France mentions 2028 as a target. For the Commission, this is about the fight against dangerous products, those that do not comply with EU standards, and to restore tax fairness between local trade and imports as well as environmental considerations such as CO2 imprint for transports. Brussels already opened investigations against Shein on suspicions of selling products that do not comply with EU standards. Similar concerns have been raised against Temu. The European Commission also estimates that some 65% of those packages are undervalued to avoid customs duties, money that is lost to EU countries’ fiscal budgets.

Now that the US market is becoming more unattractive for low value imports from China, efforts are likely to increase to sell small value items into the EU. Will the EU speed up its response because of this? Donald Trump just had to sign an executive order to end the advantageous duty-free regime for small parcels from China. In the EU the decision-making process is more complicated and takes more time. Advancing the deadline from 2030 to 2028 for ending the duty-free scheme for small parcels is a first step. Implementing a mechanism for import controls requires another coordination bonanza over the coming months.

Golden visas offer residency for investment schemes, which allows individuals to obtain temporary or permanent residency in return to an investment in either properties, a company, for creating jobs or by making a donation. In Europe, those golden visas come with an additional bonus of visa-free travel in the 26 Schengen countries.

Malta went the furthest, offering not only residency but citizenship, a golden passport, in return for a minimum donation of €600,000. Since 2015 the programme has generated more than €1.4bn in revenues , according to Bloomberg. Yesterday, the European Court of Justice ruled against Malta’s scheme. According to the court, an EU state

“cannot grant its nationality – and indeed European citizenship – in exchange for predetermined payments or investments, as this essentially amounts to rendering the acquisition of nationality a mere commercial transaction”

This verdict is the result of a legal challenge launched by the European Commission against Malta in September 2022, which argued that a cash-for-citizenship policies exposes the EU to money laundering and security risks. The ECJ’s verdict did not confirm the opinion given last year by Anthony Collins, advocate general at the ECJ, who concluded that it is for EU countries themselves to determine who is entitled to be one of their nationals and, as a consequence, who is an EU citizen.

The ECJ's verdict on Malta comes as the new US administration started offering the so-called gold card. Donald Trump announced in February that for a donation of €5m to the treasury, investors would get legal residency privileges and a path towards citizenship. Companies will also be able to purchase these cards on behalf of their foreign employees. The sales of those visas will be used to reduce the deficit, according to Trump.

Golden visas are not a new phenonemon. They have been used by countries like Canada since the 1980s or the Caribbean islands. In Europe, Portugal runs a scheme popular with Chinese and more recently also US citizens. Hungary relaunched a new scheme last year for temporary residency.

The ECJ’s ruling will not only affect Malta’s ability to offer its golden passports, but also act as a warning to other nations. Some already ceded to political pressure. The UK, Ireland, the Netherlands, Greece and Spain have either tightened the rules or ended their schemes. 

In Spain, there were also economic reasons for closing the scheme. The country has seen another spike in real estate prices. For the same reason, Portugal removed investment in real estate as a basis for its golden visa.

Last year, investors pulled out of solar and wind energy. The all else dwarfing exodus in the first quarter of 2025 has been from batteries. The retreat from sustainable investment is in full swing. Donald Trump is a factor, obviously, since the US is the largest economy in the world, and it is moving away from green energy. But in the US the trend already started in the last quarter of 2022, with a run of ten consecutive quarters of net fund outflows, according to data from Morningstar. The Europeans have now joined the exodus of sustainable investment. And so have the Asians.

The problem with sustainable investment is that it has become unsustainable as so many ideas from the latter part of the age of hyperglobalisation. We always thought the most useful shortcut way to think about this is through Dani Rodrik’s trilemma: You cannot have national sovereignty, democracy, and hyperglobalisation at the same time. You can think about the EU as an attempt to fight this trilemma – the current version of the EU with deeply integrated decision-making procedures and regulation, but where the ultimate power still resides with member states. This version of European integration is as unsustainable as a European battery factory.  

Sustainable investment is by definition long-term, and would have required a consensus that persists across the political spectrum, and across time. Instead of permanent consensus we had occasional majorities. The unsustainable either ends because it self-implodes, like a Ponzi game, or because nobody turns up anymore. This is the second variety.

The global retreat of sustainable investments also has implications for central banking. Green central banking was Christine Lagarde’s big idea. These were the heydays of QE, when central banks could choose which corporate assets to buy. Bank portfolios were scrutinised in respect of their carbon exposure, with the argument that that this constituted a financial risk that was not caught by standard risk metrics. What the private sector outflows are telling us is that financial institutions can also face the opposite risk through excessive exposure to dead-end green technologies.