Car production in Italy is having a terrible time. Stellantis, by far the biggest car producer in the country, is producing volumes that are severely down year-on-year. According to the FIM-CISL trade union, it made 33.6% fewer cars in the first half of 2025 than in the same period in 2024. If you take van production into account, the year-on-year drop is 26.9%.

By the end of the year, the union estimates that Stellantis will have produced 440,000 vehicles a year. If this turns out to be true, it will be well below the 1m vehicle per year target that the firm agreed on with the Italian government. Overall production capacity for cars in Italy is 1.5m units a year, so utilisation will be lower than a third. The industry would need to be at 70% utilisation to ensure longer-term profitability.

Part of the issue has been a very bad experience with electric car production in Italy. This has been the case for one of Stellantis’s main factories in the country, its Mirafiori plant in Turin. Mirafiori, and Turin, are the spiritual homes of both Fiat, now part of Stellantis, and Italy’s car industry. But problems with an electric version of the Fiat 500, and low demand for the car, have led to repeated stoppages at the factory. Stellantis will be hoping that a switch in strategy to hybrid cars can pay off. But it’s still hard to see how such a sideways production situation can be reversed.

There are lessons from this entire experience that the Italian government should learn, and other ones that it will probably learn. One is that industrial policy should focus on new technology, and providing incentives for it, rather than dragging the old along. Italy was slow to the mark in getting an incentive scheme together for electric cars. More work could also have taken place, especially at the European level, on the electric car supply chain. China, now the world’s dominant electric carmaker, has been doing this for decades. We are way behind the curve.

But the lesson the government probably will learn is that it is risky to let big businesses fall out of Italian hands. Stellantis came about in 2021, after a merger between Fiat-Chrysler and the French Peugeot. The Italian Fiat, and its founding family, the Agnellis, were the dominant players in the Fiat-Chrysler relationship. Their influence has been diluted in the subsequent merger with Peugeot to create Stellantis.

The Italian government is likely to view it as not coincidental that the big drop-off in car production happened soon after the merger. It has already had various spats with Stellantis, which has tried to placate the government on several occasions. If car production in Italy continues to prove underwhelming, it wouldn’t be surprising to see the government double down on trying to keep the country’s largest firms in Italy.

Emmanuel Macron came from nowhere in 2017 and won the presidential elections. But as fast and furious as he came to power, will his movement outlast him? After his second term as president ends, who will take over from him? There is a non-trivial chance that Macron’s movement could disappear back into nowhere. 

There are various contenders to succeed Macron, and every one of them is running their own show. The most popular ones are Gabriel Attal and Edouard Philippe, both coming forth with their own programmes and support base. But Macron is not keen on either of them. He warned last Saturday that if they keep on strategising about the 2027 presidential elections, they will not get anything done until then and nobody from this party will survive. Does the party need another rescuer?

Emmanuel Macron had suggested in the past that he would leave the political stage once his second presidential term is over, and that for him there is a life beyond politics. But now Macron seems determined to stay. Last Saturday, on a surprise visit to his party’s youth group, Macron told his young audience that he will need them for years to come. If Macron continues to linger around in politics, in what capacity? Would he consider to run again in 2032? The French term limit for a president only applies to two consecutive terms. He could run again after a break. So far, he remains deliberately vague: I will need you for the next two, five, and ten years, he told his young supporters.

Macron’s greatest concern was that one day the Rassemblement National could come into power. At the same time, he is making life harder for a potential successor. By considering himself indispensable and neutralising potential contenders within his own party, Macron may end up preparing the way for the RN indeed.

As the holder of its rotational presidency, Brazil is hosting the Brics+ summit starting this Sunday. The delegations of eleven member states and another 10 observer nations are expected to attend. But there is still not enough coverage out there to make sense of what to expect substantively. The first notable news that emerged ahead of the official meeting is the setup of a new guarantee fund backed by the Chinese New Development Bank (NDB) to lower financing costs and boost investment in member nations, Reuters reports.

This fund is similar to the World Bank’s Multilateral Investment Guarantee Agency. It seems to step into the void in global investment shifts that Donald Trump’s US policy is leaving behind. No additional capital is required from member states at this stage. Instead it channels Chinese money towards projects that are expected to create for each dollar invested another 5-10 dollars in private money, according to Reuters.

There are also some expectations that the summit could see the launch of a new financial system that the Brics countries have been working on for the past decade. Phillip Patrick travels with his team from the Birch Gold group to Rio de Janeiro to be part of this historic moment, as he told Steve Bannon on his podcast. Great anticipation, but will it happen?

Notably absent from the summit is Xi Jinping, a first since he came to power, and a last-minute announcement. Why Xi chose not to attend, and how this reflects on the summit, we may never know. China is sending prime minister Li Qiang instead. Russia and Iran are also said to send their delegations, but this was more to be expected.

We also have yet to see how much politics intrudes for this trade bloc. The summit happens at the tail end of the Iran-Israel-US conflict. On a more fundamental level, the Brics+ include democracies and autocracies that have different foreign policy interests. India and China are two large member states at odds with each other. Brazil sees itself as a leader nation of the Global South and member of the Brics+, which may bring Lula da Silva’s own agenda also to the table. And this is just talking about differences amongst the five original Brics countries. Since the expansion of six more countries, most of them proposed by China, they are also experiencing what it means to manage a group of more than ten countries with a diverse and increasingly long agenda.

From 7 July, Poland will introduce its own checks at its borders with Germany and Lithuania. Donald Tusk’s decision is a direct response to the German government’s unilateral move of introducing border controls in May with its aim to send illegal migrants back to Poland. It also comes after the hard-right PiS won the presidential elections.

Poland’s retaliatory move is mainly about political posturing, a bow towards the hard-right parties and their supporters, by being tough against Germany’s unilateralism and ready for action to prevent migrants being sent back to Poland. Border checks are one of the easy options politicians seek when they want to cut immigration. And it has become acceptable to suspend Schengen, the borderless travel area for 29 countries.

But it does not do much in practice to combat migration. According to the German police union, about 160 asylum applicants have been rejected in the first four weeks since Germany imposed its border restrictions. This is nothing compared to 1300 people who were rejected for a lack of valid documentation.

Checkpoints are sign posts of frictions between different jurisdictions, in this case between Poland and Germany. It disrupts travel plans of ordinary people and complicates cross boarder work conditions. It emphasises differences rather than solutions.

After Germany and Poland, which country will be next to introduce checks? Politicians say those checks are temporary and are mainly meant to deter people from coming to their country. Really? Now that the hard-right gets one of its wishes, do we expect them to back off or double down? Going down that path of further tightening controls may be tempting for centre-right parties at the moment but it does not solve the problem.

Instead of bowing to the hard-right, it would require for centre-right parties to define a new approach towards migration. It is not enough to look at migration only from the defensive side. There are also more cooperative ways to look at migration. Europe is ageing and needs more legal migration to keep financing its social security system. Europe could increase local support in the original regions to reduce the need for people to flee. Doing our bid in balancing the chances is the responsible thing to do that also benefits Europe.

Tusk’s move also feeds a potential flare-up of tensions between Poland and Germany. Tusk said Warsaw’s patience with Germany sending migrants back to Poland is exhausted. There are patrols along the frontier with Germany by Polish vigilante groups that have ties to right-wing parties, Fakt reports. Those tap into old narratives and wounds that bring nothing but misery in the future.

The German government decided unilaterally on policies without thinking of the consequences with its neighbours. This has been the case for these border checks as well as for the decision to increase German debt from 60% of GDP to 80% to modernise and expand German military capacities. But for Germany and Poland to divide over border controls is to give in to the AfD and the PiS. The centre needs to hold if the ascent of the hard-right is to be prevented.

A heatwave has effects on the land, health of humans and animals and the economy. Every aspect of socio-economic life in Africa has been affected by the warmest decade on record. The hot air from Northern Africa is also spreading across Europe over Portugal, Spain, France, Greece, and across the Balkans. Even up north in the UK temperatures have been soaring. The CNN wrote that Europe is now the fastest-warming continent, warming at twice the rate of the rest of the world.

This also affects our economies just when forecasts said they are about to turn the corner. German Allianz insurer suggests in its publication that this heatwave could cost Europe 0.5 percentage points of GDP, ranging from 0.1pp for Germany to as much as 1.4pp for Spain. One day of heat with temperatures above 32 degrees is, for the economy, like half a day of strike action. Hotter temperature can reduce labour productivity, work hours, and labour income.

Using US wealth data, a study finds that one additional day above 32 °C lowers the annual payroll by 0.04%. This is even if some of the productivity losses during the heatwave is later made up for during cooler periods. An ECB paper finds that manufacturing and services partially rebound after a heatwave, while agricultural and certain infrastructure losses tend to persist.

It is not hard to see why. The ability to perform physical labour drops as the temperatures rises. In agriculture certain crops are lost or its yields significantly reduced; livestock, chickens and other poultry in particular, succumb to the heat, while cow milk production slows down.

The energy sector is also sensitive to the heat putting strains on the grid and the electricity production. Nuclear power stations lose efficiency if their cooling source warms up. Heat can also disrupt transport, and deform train rails or asphalt.

During heatwaves, the pressure on politicians to do something increases. Some countries have emergency plans in place to warn and prevent harm. France for example has a heatwave plan for the regions since the devastating 15 day heatwave in 2003. During this current heat wave Metéo France put 16 regions under a red alert that come with restrictions on traffic, suspension of certain activities like sports, and school closures. Yesterday a new decree entered into force in France laying out obligations for employers towards their employees during the heatwave. Opposition leader Marine Le Pen had the brilliant idea to call for more air conditioning in nursing homes, schools and hospitals, a provision that was part of green legislation that her party voted against only two weeks ago.

Adaptation is key for coping well. Organising working hours differently, shifting them towards cooler times of the day is a short-term measure to reduce the fallout. Long-term plans, like urban greening and reducing heat retention in buildings, is another. France has plans to make hospitals and schools heat-proof, but there is a lack of money and determination to get those projects off the ground.

Every heat wave is different, but it starts to become a constant feature of our lives. This may change how people think about climate change action at home or abroad. Prevention measures in Africa could also lower the likelihood of heatwaves in Europe. There is a bigger picture out there. Unfortunately, politics is mostly national while the EU currently has other priorities including how to protect European industries against competition from China and Donald Trump's tariffs.

The Kiev Independent tells us that Russia has taken over one of Ukraine’s most valuable lithium mines in the village of Shevchenko in the Donetsk oblast. Ukrainian forces are fighting around the village, but the Russians are now in full control of the 40 acre plot of land that sits above the mine.

We are in the phase of the war where both sides are nearing exhaustion. Russia’s summer offensive is going well, but we are talking about tactical victories, not something an untrained eye would easily spot on a battle map. A large lithium mine is almost surely valuable to Vladimir Putin, and there may be other smaller valuable pieces of resource-rich land up for grabs. Russia is progressing at the rate of a few hundred meters a day as part of its current summer offensive. A really big price for Putin would have been the industrial city of Kramatorsk in the Donetsk oblast. But this is still 20-30km away from the Russian front, and well-protected by Ukrainian forces.

What appears to have fortified Russia’s determination to continue fighting is that the West has diverted missiles for the Patriot Air Defence System to Israel, thereby creating shortages in Ukraine. The view in Moscow is that without permanent missiles supplies by the US, Ukraine will eventually run out of air defences. We are not in a position to gauge whether this assessment is correct, but even if it is correct, Ukraine is not in a position of acute missile shortages at this point. But assessments such as these might explain Putin’s determination to fight on a little while longer, St Augustine style: let me peaceful, but not just yet.

Robert Solow once said that he sees computers everywhere but in the productivity statistics. Thanks to computers, we could do more things but not necessarily become more productive doing the things we needed to do. It took decades until it showed up in the productivity statistics. Computers changed job profiles but did not reduce employment overall. Could the same happen with AI?

When thinking about the future impact of a new technology on society, our imagination is often constrained by assuming that everything else remains equal. But people will change with AI and find new ways of interacting with it. Just as open-source software did not make redundant paid software developers. It just created the need for a different kind of services. Societies adapt in what they need, in work, production and consumption.

AI may one day replace factory workers, but there will be a need for high quality engineers to look after the robots. Even the cleaners will have to upgrade their skills to deal with these machines. It needs people who know how to build a whole infrastructure including renewable energy sources to meet AI’s high demand for energy and connectivity.

AI may write research reports for us by seeing patterns that we could not have digested in such a short time. Yet it does not replace the researcher who still needs to add the creative spark to what the project is about and what the results mean. True creativity still needs humans. And humans are not going on eternal leisure holidays just because AI will do their day-to-day desk job; they will apply themselves in different forms.

There is also the idealisation of what AI can deliver. It is not a deus ex machina. Its models were trained on input created by humans. Its output too exhibit characteristics of humans, including hallucinations, looping or deceptively avoiding things. AI will create new problems for us to work out too. Just like computers. The computers today are not comparable with the ones in the early 1990s when all we wanted to do is writing, calculating and sending emails to each other. Now we do banking on a computer, file our taxes, and sign documents. We had to learn how to adapt. We now have to protect our computers against viruses and find a way to remember all those passwords. Storage is still an issue as it was in the early days because new software or games need memory which is rising with what is technically feasible, even if the curve has significantly flattened.

AI can help to reduce complexity just as the computer helped us to reduce the time we spend on researching, writing, and filing our written work. The human jobs will continue to be indispensable in complex production processes using AI where work is complementary, not a substitute. There are those who know how to repair broken things. Connectivity issues with the robots will have to be solved by engineers. There is still demand for those who build the next generation of AI applications, those who feed into the knowledge from which AI draws. Humans will not just simply disappear from this process. The open question is what they will do with the gains in productivity and money. The hospitality sector will still be in demand. If anything, it may go up in price if the profits from AI benefit enough people to go on holidays or restaurants.

The path towards automation and AI on the workplace is long and windy. There may be driverless cars driving around in LA or Texas already, but not in Europe thanks to health and safety regulations, as Luis Garicano points out in his latest substack post. Applications of AI in companies are also subject to labour laws in various EU countries. There will be political pressure in several EU countries to tax AI services that replace work to create a level playing field for employees.

No matter what prism you use to look at AI and its implications for societies, be it Baumol’s cost disease, the O-ring theory, or more anthropological views on how technology interacts with humans, it all suggests that this is not a great replacement that is taking place, but a new form of adaption will be required if a society is indeed ready to embark on this AI journey.

Europe is a paper tiger when it comes to Middle East foreign policy. There is too much disunity amongst member states to say or do anything meaningful. At best it is just virtue signalling, waiting for others to create facts on the ground. When the US and Israel started their attacks in Iran, EU leaders insisted that Iran has to return to the negotiation table. At the EU summit yesterday, leaders deplored the unacceptable number of civilian casualties and the levels of starvation in Gaza, but no actions could be decided. Europe is leaving it to Uncle Sam to sort it out, negotiating a ceasefire and a solution for Gaza. Forget those brief moments when strategic autonomy was a buzzword. Daddy is back in Nato, and nearly everyone seems relieved. It is like hanging on to the old world as long as possible. But there is a reputation for us to lose in the Middle East too, and this is our close neighbourhood.

After the EU summit Pedro Sanchez said that it makes absolutely no sense to pass 18 sanctions packages on Russia for its aggression against Ukraine but not even being able to suspend the Association Agreement with Israel when they are flagrantly violating Art. 2 of the agreement. This stipulates the respect of human rights as an essential element. Ireland and Spain have been pressing for a review of the agreement for some time, while Germany and Hungary have been lobbying against it. In May the EU member states finally agreed to a review after an initiative from the Netherlands. The review found indications that Israel breached its human rights obligations in Gaza. But actions were postponed until the next meeting in July, in hope that by then the US will have brokered a ceasefire deal and an extended Abraham accords with a roadmap for Palestinians.

Another initiative was postponed, or perhaps even cancelled. France and Saudi Arabia planned a conference to be held in New York from 17-20 June on the two-state solution and the recognition of Palestine. The meeting was postponed shortly after Israel launched its attacks in Iran, officially due to difficulties with getting people from the region to fly to New York. But the initiative was fraught with problems from the start. Emmanuel Macron returned from his journey in Egypt determined to deliver this conference for mutual recognition, but eventually France backtracked on Macron’s commitment to recognise Palestine. The US also was strongly opposed to the meeting and warned UN member states not to participate. The world was to witness a choreographed escalation with Iran instead. And Macron missed his moment to make his mark in geopolitics.

The Europeans need to decide where they stand when it comes to international law and humanitarian aid. When it comes to humanitarian aid, what will Europeans do to get more aid back into Gaza? The US now pledged $30m towards the controversial Gaza Humanitarian Foundation that began operating in Gaza at the end of May. They invited other nations to join them. We cannot do that. If we were to join the US, it would undermine the UN mission and the humanitarian law as we know it.

There are choices to be made and those choices have consequences. Even non-action has consequences. This conflict is also poking holes into our rules-based multilateral system of which the EU had been one of its greatest champions. And Europeans watch paralysed and disunited.

One of the reasons why the German car industry went into a generalised downturn is the fanboy nature of the discourse about cars. There are no critical voices that get heard, within the industry, within government, or even within the media. We saw another puff-piece interview in a German newspaper with an executive from Bosch, entitled "Bosch Invests, Brussels Regulates". We are no fans of excess EU regulation, but you can’t blame Brussels for what is happening to the German car industry.

Until the last decade, Germany had, technologically, the most formidable car industry in the world. One of the reasons for this is Bosch. What Bosch is particularly good at is integration of top electronic engineering, including digital technologies, into each manufacturer’s models. Germany was not at the forefront of the digital industry itself, but good at combining the old world and the new. 

But Bosch nowadays has the same problem as the companies it supplies. It is falling behind the competition from the US and China in the AI-based technologies of the future. Having failed to take electric cars seriously in the last decade, the German car industry made another critical error in this decade: to focus on the level 2 and 3 version of automated driving, which still require the presence of a driver, and offer limited scope, like motorways only. The US and Chinese manufacturers have started to leapfrog this stage and are already experimenting with driverless taxis. The global leaders are Waymo, Tesla and Nvidia in the US, and Huawei, XPeng and Baidu from China. The robotaxi has become a sight in Phoenix, San Francisco and LA, and most recently in Austin, Texas, where Tesla launched a service. Baidu has launched a service in 10 cities in China, including in Beijing and Shanghai.

WeRide, a US company, has just received a licence to operate a driverless minibus service in the Drôme region in southern France. VW is planning a robotaxi launch in 2026, but this launch will occur in special geo-fenced zones, and require a remote monitoring infrastructure. The technology does not come from Bosch, but from Mobileye, a US-domiciled and Israel-based autonomous driving company.

There is virtually no discussion, and certainly no alarm, about the loss of technological leadership. As for their criticism of EU regulation: the purpose of regulation has always been to protect European car makers from outside competition. If Brussels opened the gates, as we think they should, it would be large US and Chinese companies that would offer the services. That's the side effect of protectionism. Eventually you fall behind. 

In last year’s British election, Labour secured the kind of majority that most political parties in Europe can only dream of. Although there’s been some attrition in the year that followed, Labour still holds 403 seats, compared to the bare majority needed of 326. It would take a staggering feat of political incompetence for any government with this kind of latitude to have to back down on anything it wants to do because it lacks legislative support.

But this is what’s happening to Labour now. The government has decided that it wants to try and save £5bn a year by cutting different benefits programmes, namely disability benefits. Both doing this in principle and the way the government is going about this, by cutting so-called personal independence payments, has upset a large number of Labour MPs. Last night, 123 Labour MPs were reportedly prepared to rebel against the bill to deliver the cuts in Parliament. At least 84 Labour MPs would need to rebel on any particular initiative to defeat it in Parliament. Voting on the welfare bill is due to take place next week, on 1 July. 

It looks, therefore, like the government will have to go back and revise the bill. The problem, however, is that they still need to do something about sickness and disability benefits, which have ballooned in recent years. Since the pandemic in particular, it has increased markedly. The government now spends more on sickness and disability benefits than it does on defence. Spending on benefits for working-age adults makes up the vast majority of this.

But the government has messed up both the messaging and policy. It has arguably focused too much on winning over public support first, before ensuring it actually has the numbers it needs in Westminster. The message has been one about the need for fiscal prudence, as opposed to a moral imperative to support people in work. Measures to try and support benefits claimants into work have also come at the same time as the cuts, rather than before them, another mistake that has contributed to this mess. 

Labour’s big problem seems to be one of organisation, on different levels. First, there is not much of a grip on things by those situated around Keir Starmer himself. But this mess also doesn’t portray Liz Kendall, the minister responsible for work and pensions, or Rachel Reeves, the Chancellor, in a good light either.

We have noticed that with British governments, it is especially the chancellor who makes a big difference to how effective you can be. The treasury is so powerful relative to virtually every other department that having someone in charge who can provide vision, and a sense of direction, can be the difference between success or failure.

Tony Blair was successful in large part because Gordon Brown knew what he wanted to do, and how he was going to do it. Whether you agree or disagree with what he was trying to do, David Cameron also managed to get a lot done with George Osborne in Number 11 Downing Street. Osborne was so powerful that the government was a virtual diarchy. But it worked, at least for what he wanted to do. By comparison, things now look rudderless.

But although how this government has handled things is perhaps uniquely bad, the problem they have run into isn’t unique. Ageing populations and political fragmentation will put more spending pressures on European governments, at a time when they are also trying to spend more on defence. Trying to manage such a large welfare bill is one reason why the UK has been quite reticent to make too many shorter-term commitments on defence spending.