There are two, extreme stories out there about the transition in energy away from fossil fuels. One is that fossil fuels, and the assets and companies that produce them, are essentially dead. There is a lot of talk to this end about so-called stranded assets in particular: production equipment, transport networks, and refineries or power-plants that will be worthless in a post-oil world. On the other, you have arguments that the energy transition is basically fake, and that renewable energy adoption will peter out and not pose any problem for fossil fuel producers.

As always, the truth is somewhere between the two. In the near-term, fossil fuels are indeed here to stay. As Javier Blas pointed out, the International Energy Agency is now more pessimistic about an earlier prediction that demand for fossil fuels – coal, oil, and natural gas – would peak by the end of the decade. Demand for coal, the dirtiest fossil fuel in terms of emissions, still grew in 2024, by 1.2%.

But there is another side of the story. Whilst the IEA’s previous forecasts may have misjudged how soon peak fossil fuel demand is coming, they also persistently underestimated renewable energy, and especially solar, demand growth. Although electricity demand is still growing, solar in particular is doing the heavy lifting. According to a recent report by Ember, in the first half of 2025, global electricity demand grew by 369 terawatt-hours. The increase in solar power generation met 306 terawatt-hours of this, and wind power generation grew by 97. For the first time in history, renewable energy generation overtook coal power generation.

The other part of this is that electricity demand is growing in part because of electrification: power replacing other forms of energy generation and consumption. This process has essentially stalled in the US and is continuing at a snail’s pace in Europe. But in China, and much of the developing world, the share of energy consumption met by electricity is still rising.

What’s going on, then, is that energy demand, and electricity demand to a greater extent, is still going up. While it does, demand for fossil fuels is still rising overall. But renewable energy generation, and especially solar, are still rising faster. In China, the epicentre of this shift, power sector emissions actually dropped through the first half of 2025, by 46m metric tons of CO2.

In Europe, the situation is more complicated. We are still on a similar trajectory, but it is happening more slowly, and fitfully. In the first half of this year, fossil fuel power demand actually grew year on year, because wind and hydroelectric generation underperformed. Increasingly, here we can see solar continuing to grow whilst the wind industry in particular struggles. But it is not growing at the same rate as in China.

Golden visa schemes have, in the past, helped some European governments attract foreign direct investment from abroad and create a new revenue source for their budgets. According to a briefing for the European Parliament from September 2024, sixteen EU countries offer such residence permits with Schengen travel rights for those investing in real estate, companies, education, job creation, or those who just deposit money into bank accounts or investment funds. At the time of the report, six EU member states still offered a golden visa in return for buying or renovating real estate. And the entry fees varied from €80,000 in Latvia to €500,000 in Hungary or Spain, with different conditions attached.

Real estate-linked golden visas create real effects in the economy. The more popular schemes matter for small countries, and the surge in the housing market led to serious pressures in certain local residential areas, making housing unaffordable to those who live and work there. This happened in Portugal and in Greece, for example. It forced governments to change the criteria or even abolish the real estate part of the visa. But even if the governments succeed in halting the rise in house prices by tightening the eligibility criteria, it has only stabilised them at high levels. Properties in Athens still are unaffordable for many households.

The economic effect reminds us of the AirBnb schemes that led to a surge in buy-to-let loans, driving up local housing prices. The difference is that the AirBnb momentum was market-driven, while the golden visa scheme was created by governments who could sell the benefit of the right to travel across Europe with ease.

During the financial crisis, these golden visa schemes were a financial lifeline for troubled holiday destination countries. Greece, Cyprus, Malta, Spain, and Portugal all benefited from the influx of capital and tax revenues, mainly from Asian investors. Compared with the tedious bailouts some of them went through, private money was their only way of setting conditions over finances which allowed them some form of dignity.

But they also faced pushback from European institutions over using Schengen visas in return for money they had little oversight over. There has been a quest to unify the rules for golden visas across the EU ever since, with only modest success.

Most changes are still driven by member states themselves. Ireland closed its scheme in 2023, whilst the Netherlands did so in 2024. Portugal shut down the real estate part of its visa scheme. Others, like Greece, tightened eligibility criteria.

The legal problems they face are most likely to increase. The European Court of Justice (ECJ) ruled in April 2025 that Malta's visa programme is incompatible with EU law. While this does not substitute a unified rule for golden visas, it sets a precedent for other EU countries to stop selling EU citizenship for investment, or risk being forced by another judicial verdict to wind up their schemes. The clock is ticking. 

One of the experiences we made during a lifetime of political and economic commentary is that the biggest and most consequential misjudgements, including our own, come from cognitive biases. The worst of all is confirmation bias - or wishful thinking. Another is model bias. Nowhere is its impact more pertinent than in the world of macroeconomics. It is what gave us the Washington consensus that favours the multilateral global trading system and free capital and labour mobility across countries. In that world current account deficits or surpluses did not matter. There is no downside to free trade and no need to compensate the losers because there weren’t any.

We had the occasion at an international conference over the weekend to contrast western macroeconomists and their eastern counterparts. If it were not for Donald Trump, the western discourse is pretty much the same it would have been twenty years ago. The Asian discourse, by contrast, is becoming more tech- and data-oriented. In one study quoted at the conference, two authors from China, and a colleague from the US, downloaded 3m documents from multiple levels of government in China - central, provincial, and municipal - to catalogue industrial policies. They used an AI model to classify and extract the information. This is the direction where modern research is going. There is still place for theory in this world, but one in which theory tries harder to understand the world as it is, not as it should be. In a discussion on crypto-currencies we noted a broad-based denial amongst the macroeconomists present. You can spot a defunct economist when they tell you for 17 years that crypto is a bubble.

Another example, which left us sad, was that of a highly respected western macroeconomist who appeared at a loss to explain what is happening, and who expressed deepest regrets about the Trump administration's tariffs policies. The economist pleaded with the Asian colleagues present not to throw out the multilateral order because of Donald Trump. An Asian economist responded by saying that the WTO was not a good model to organise intra-Asian trade, if only because it is dysfunctional beyond repair. They want to create their own institutions. This is how fragmentation ripples through a broken system. 

We are not claiming that all of these new approaches are praiseworthy here, or that all modes of new thinking will succeed. Many will fail. But they have one specific advantage. As of now, they do not suffer from the same degree of confirmation and model bias that has afflicted mainstream macroeconomics. They should practice as they preach, and let bygones be bygones. Instead, they are still clinging on to a world of a multilateral trading system, a world that has is leaving us.

Ageing populations tend to lean more to the right. As demography shifts, the demand for more protectionism rises. Central and Eastern European countries have seen the most dramatic change in demography in the post-communist era. This tended to translate into support for populist parties, ones that were quite different compared to those in western European democracies. The Czech Republic is going to the polls today and tomorrow and are likely to get another populist government.

In the Czech Republic, demographic decline recorded since 2008 has benefited two populist parties, the ultra-nationalist Freedom and Direct Democracy (SPD) and the more moderate Ano party founded by the popular billionaire Andrej Babis, according to the empirical paper by Tomas Dorak, Jan Zouhar and Jan Biha.

This weekend Babis and his Ano party is set to win those elections, but not with an outright majority. Opinion polls and public statements suggest that their choice of political ally is limited to the populist SPD party, the far-right and anti-Green-Deal Motorists, and the far-left Enough! – an ad-hoc alliance between former Communists and the remainders of the Social Democrats. The poll of the polls from Politico has Ano at around 30%, the SPD at above 13% while the Motorists and Enough! are both at 7%.

What is the price Babis will have to pay for their support? Those coalition candidates have called referendums on leaving the EU and Nato previously. Babis has been arguing against it on the campaign trail, using the example of the UK to argue that leaving the EU brings nothing substantial in return. He is also a defender of Nato. Would he concede under pressure?  An Ano-led government certainly means more resistance to supporting Ukraine, which would bring the Czech government more in line with positions defended by the governments in Hungary and Slovakia.  

Will populist parties be the only option for Babis? Spolu (Together), an alliance of centre-right parties that includes the incumbent prime minister Petr Fiala’s Civic Democrats is polling at around 19%, whereas the other parties of the current pro-Western coalition government Stan (Mayors and Independents) and the Pirates are predicted to end up with 10-12% each. All of them excluded a coalition with Ano or backing them in parliament. This is pre-election talk and could change depending on the outcomes and to prevent the more radical alternatives to derail Czech’s pro-Western course. Within the current government there are factions that share Ano’s positions: committed to Nato, a weaker EU membership, and opposition to euro adoption and the EU’s migration quotas, as well as to the green deal.

Babis has been a constant fixture in Czech politics for the past 15 years, first as finance minister and later as prime minister, leading the government from 2017-2021. He also tried to become president in 2023. As one of the richest people in the country, Babis has considerable stakes in agribusiness and the media. He faced legal challenges over conflicts of interest and EU subsidies fraud while out of office. Yet it is also his business interests that anchor his positions in the west.

In a second spell in office, he could use his leverage to weigh on the media and the judiciary as Victor Orbán did in Hungary. Circumstances also changed. Now that Donald Trump sets new standards for what is permissible in the leading democracy of the western world, it also affects the perception of red lines in Europe. Babis stands for a more nostalgic, less muscular populism than Trump or even Orbán. But what kind of populism finally emerges in concrete political positioning crucially depends on his choice of allies.

...or could it be anything but the name of Zucman, who inspires the French left? Sébastien Lecornu is a quiet operator, but eventually he has to present a budget that squares the demands from his coalition parties with concessions to the Socialists. While the headlines suggest those are incompatible, Lecornu is looking for alternative proposals. There can be neither a Zucman tax nor a suspension of the pension reform as the Socialists wanted. But perhaps a larger social contribution for the wealthy and pension concessions for women? Lecornu needs a budget proposal that the Gaullists in his camp can live with while giving the Socialists something for their voters. Lecornu also says he wants a real break in substance with Macron’s policies without compromising progress.

Les Echos has a range of proposals currently studied by the finance ministry. There is a rise in social contributions of 0.5-1 percentage points on capital income. The flat rate levy of 30% on capital income, which includes taxes and social contributions on capital income, was created in 2018 and is the hallmark of Macron’s supply side policies. The rise would affect a wider range of people, not only the wealthiest, as it also applies on life insurances. The other is to extend the mechanism introduced by Michel Barnier to ensure the wealthiest pay a minimum tax of 20% on their income. Extending this would generate some €1.5bn. Another is the Sarkozy surtax, introduced in 2012 as a temporary 3% extra income tax for those declaring more than €250,000 or 4% for those beyond €500,000. There could be also another tier in the income tax system.  Large companies with a turnover of over €1m could see an extension of the 2025 surcharge on profits, which is expected to yield €8bn. This is the range of measures Lecornu can pick from when he enters into the decisive next round of talks with the Socialists this Friday.

Lecornu has signalled that he is ready to break with the supply side mantra, but not at all costs. It may help that he managed to build a rapport with Olivier Faure, the Socialist leader over the past three weeks. Have the Socialists accepted his no to the Zucman tax? For the left it is a matter of fairness, of who contributes to the consolidation efforts. For the government, it is to find a measure that actually sticks and that does not destroy productive capital. Wealthy taxpayers are also more mobile. The economic institute Rexecode demonstrated this point in an counterfactual exercise. They calculated that instead of the Zucman tax the same amount of €20bn would have been in the budget as revenues today if wealthy entrepreneurs had not left French territory due to excessive taxation over the past 43 years. These are the hidden costs of an increase in wealth taxes that we hardly read about in the media.

We do not know yet which of the proposals Lecornu will chose. But what is clear is that political compromise to solve the political impasse has its costs. Political uncertainty and the constant talk about wealth taxes affects entrepreneurs, and could ultimately end up costing the government the same or more than what can be collected from a temporary increase in tax revenues.

In France, purchasing power has been the barometer for politicians and economists over decades. French households have been highly sensitive to changes to living costs, ready to mobilise for protests in defence of their purchasing power. Consumption is an important lever in the economy, representing half of the French GDP. Culturally too, there is a belief that consumption above the level that is needed constitutes a symbol of wealth and sophistication. Politicians concluded that maintaining or even increasing purchasing power is essential for social stability, economic confidence, and the well-being of their society.

But what if there are structural shifts in this relationship between culture, economics and politics?

Insee observes in its latest economic report the paradoxical situation that although inflation is with 1.2% low compared to the rest of the euro area, it did not translate into a recovery in household purchases despite their gains in purchasing power.

Consumption in goods has been decreasing since the inflationary crisis in 2022, though consumption in services is cushioning the blow. According to the BPCE's Digital & Payments Barometer that analysed more than 20m bank transactions, it shows that people reduce their spending on food and clothing to spend more on travel, restaurants and cultural outings. In total, service and good consumption is expected to grow by 0.7% this year according to the Banque de France.

Political uncertainty is one factor that explains why the French increase their savings this spring to almost 19% at the end of June. This uncertainty is not going to unravel any time soon. Insee also reports that 7 out of 10 households limit their consumption according to their survey. More than a third of those do so to balance their budgets.

But there are other more structural reasons to expect that consumption patterns are structurally changing. Les Echos writes that amongst the affluent, young people, and urban dwellers, a more sober and economic lifestyle is gaining more traction. We are reminded of a sudden change in consumption behaviour in Germany in the early 2000s when all of a sudden going to restaurants or driving big Mercedes cars was considered indecent. We also see today that Chinese clothing retailers like Temu and Shein are swamping the market with cheaper products, meaning less needs to be spend on trendy outfits. Then there are other long-term factors, including a shrinking population.

How to read those sensibilities and how to respond to them will be a new challenge for forecasters and politicians alike. The times when consumption grew at an average of 1.5% seems to be truly over.

The global financial crisis did not start with Lehman Brothers. There were many early warnings before. One of the canaries in the coal mine was New Century Financial Corporation, a large subprime lender, which went down in April 2007.

The global financial situation today is different in many respects. Financial risks are building up in several segments of the private US debt market where we have seen two car-related bankruptcies. The first was the chapter 7 liquidation filing of Tricolor Holdings, a used car dealership chain that specialised on offering car credits to customers with no credit rating – often from Spanish speaking communities. As with subprime twenty years ago, those loans were repackaged into complex financial products, to which several banks have been exposed. Then came yesterday’s chapter 11 bankruptcy filing of First Brands, a US auto parts manufacturer, which went down because investors failed to restructure the company’ $6bn in debt. It had previously expanded its business through aggressive debt-funded acquisitions.

There are clear signs of an overheating debt market, with a return of structured finance, similar to products like CDOs that were designed to disguise the risks. One sign of an overheating market is the narrowing in the spreads between high-yield and investment-grade bonds, which we are seeing right now. Investors are betting heavily on bonds as the Federal Reserve is cutting interest rates. The Wall Street Journal reported of a transaction that is likely to become the largest leveraged buyout of all time. Donald Trump’s One Big Beautiful Bill will add further fuel to a debt binge that started in the Biden Administration. We worry about toxic interactions between private and public-sector debt in the US, but also in Europe.

This is not a re-run of subprime, if only because the global interlinkages are different this time. We see no evidence of the stupid Dusseldorf bankers, a famous quote from Michael Lewis’ Big Short. What we are seeing instead is a rise in global borrowing, both public and private, that started to reach bubble territory. It would take only a few foreseeable shocks to derail a lending boom. The aftersales car parts industry in the US was hit by Donald Trump’s tariff, as many of these parts originate from China and were subjected to tariffs. There are political risk scenarios, especially here in Europe, that could expose some over-indebted countries and companies.

Herbert Kickl was re-elected as leader of the FPÖ. Not really surprising given that there was no over candidate. With 96/94% he was elected to lead the party for another 3 years. But the event and Kickl’s speech also gave a foretaste of what to expect from one of the oldest far-right parties in Europe. A Trumpianisation is undeniable.  

The FPÖ increasingly uses religion and its symbols in its marketing strategy. Taken from the Lords prayer, thy will be done, Euer Wille geschehe, was one of the slogans on campaign posters last year. They also used the Stephan dome square to hold important rallies.

Religion was a topic at the party conference last weekend with the Bible emerging as a new reference book for quotes. Like the Apostle Paul, Kickl wanted to give the population back ‘faith, hope and love’. He insisted that he is a devout Christian and will not keep it a secret. Der Standard writes that it seems like Christianity is becoming an increasingly important part of the party's strategy. This is to give a religious identity as a counterweight in the party’s fight against political Islam and in order to win over voters from the ÖVP.

The FPÖ also demonstrated that they are not internationally isolated. Over many years the party had links to Russia. Vladimir Putin even appeared at the wedding of Karin Kneissl, a former FPÖ foreign minister. Since the invasion of Ukraine the FPÖ had to recalibrate its messages. No one better to turn to than Donald Trump in terms of content, strategy and rhetoric. A key motion that was unanimously approved at the party conference is in line with Trump's course, seeing the enemy mainly within the country. The motion was even preceded by a quote from US Vice President JD Vance. The FPÖ also counts on like-minded parties across Europe. Video messages from the leaders of the AfD in Germany, the RN in France, Lega in Italy, and Fidez in Hungary were streamed into the party conference.

Kickl advocates system change and continues to campaign for a clear majority to end the coalition of chaos, replacement through migrants and rainbow cults (LGBQT+). He promises that the system will not break the FPÖ but that they will break the system.

Before he can change anything though, he first needs to get into power. A look at the polls suggest that they are leading with 36% but they still need a coalition partner if they want to govern. Last time negotiations did not work out with Christian Stocker from the ÖVP. The FPÖ and many far-right parties may dream of a radical change like Trump introduced in the US. But the US party system is different, and so are the president’s powers. The FPÖ's musings are more like dreaming to be Superman while dressed up in a Superman costume.

In the Netherlands, English proficiency is extremely high. Newspapers and broadcasters in the Netherlands frequently report on political and economic developments in the UK, across the English Channel, in English or more often in Dutch. This has included the UK’s failed Rwanda plan for asylum-seekers. Despite this, the Dutch government has decided to press ahead with a plan that at first glance looks like a Rwanda copycat – a plan to send some of its asylum-seekers to Uganda.

The Dutch caretaker government, in election mode ahead of a 29 October polling date, recently signed a letter of intent with the Ugandan government. This is a bit different from the Rwanda plan in a couple of respects. For one, the Dutch government would only send failed asylum-seekers to Uganda. Secondly, it would only be asylum-seekers from eastern Africa that would go. The intention is that Uganda would be a transit point for those who are supposed to head back to countries such as Somalia and Eritrea.

There are a couple of problems with this, however. The plan could still run into legal issues, and indeed some of the same ones as the Rwanda plan did. This includes Uganda’s own patchy human rights record. Or how to ensure Uganda adheres to non-refoulement principles. This is to say not sending people back to a country of origin where they could be in danger.

Whether Uganda would remain keen on the scheme in the long term is another question. Uganda already hosts around 1.6m refugees, and it might have just as hard a time getting people it receives from the Netherlands to leave. Unless conditions are so bad that they would self-deport, which would bring us back to the legal issues.

There might be some ways around this. But the more fundamental issue is that as you try to restrict the parameters of these schemes to deal with any legal issues you face, they end up sending fewer and fewer people. The result is that your new plan to address the asylum problem only involves a very small number of failed asylum-seekers, and turns into a laughingstock. If your intention is to look serious about reducing the number of asylum-seekers in the country, you have achieved the opposite.

What happened in the UK should be less like a model, and more like a cautionary tale. The Rwanda plan ended up symbolising the farcical nature of the last few Conservative governments in office. Out of power, the one of the oldest and most successful political parties in the world now faces an extinction-level crisis. There were deeper issues that led to this, but Rwanda played no small part. In a political system that is considerably more open, and therefore more competitive, than the British one, this should give some of the Dutch political parties involved pause for thought.

Trying to manoeuvre your way through a sensitive political issue without upsetting anyone can be a bit like trying to climb a glacier. You might be able to make one step successfully. But the rest of the vast, icy expanse lies in front of you still. You can keep your footing this time, but you can still slip up later on.

Giorgia Meloni has been trying her own bit of glacier-climbing as she tries to set Italy’s policy on Gaza. But it’s getting increasingly hard to avoid falling under the ice. On the one hand, she faces public opinion in Italy that is overwhelmingly against Israel’s actions. In a survey conducted by Italian polling firm YouTrend a couple of months ago, 65% of respondents considered Israel’s conduct disproportionate, and 63% agreed with calling it a genocide. As events in Milan earlier this week showed, this sentiment is starting to bubble up into more widespread protests. On the other hand, she has her right-wing allies, and her relatively good relationship with the Trump administration in the US, to worry about.

The latest example of a balancing act came over Palestinian recognition. Meloni’s position is that she is in favour of it in principle – but only once Hamas is out of the picture. But as the war continues, with some new brazen incident, we are not sure how long she can or will maintain this for. The latest flashpoint was a drone attack on the so-called Gaza flotilla, a series of ships organised by pro-Palestine protesters carrying humanitarian aid by sea towards Gaza. The attack took place off the coast of Greece, in international waters. As an Italian frigate was nearby, it was dispatched to offer rescue support, along with a Spanish naval ship.

In the aftermath of the attack, the Italian government came up with a new plan for the flotilla. It urged the flotilla to land in Cyprus instead, and hand over its aid supplies to the Latin Patriarchate of Jerusalem, the local branch of the Catholic church in Gaza. It would then distribute the supplies. Meloni criticised the flotilla as brazen and irresponsible.

But images of explosions on and around the boats are replete, and Guido Crosetto, Italy’s defence minister, strongly criticised the attack itself, as did Meloni. Her wider problem, however, is that she is trying to deal with each of these incidents on a case-by-case basis, when this is going to continue for the foreseeable future. There may plausibly be more flotillas, also plausibly once again with Italians on board. Photos and videos of bombing and starvation in Gaza also won’t magically disappear from social media platforms.

European leaders, like Meloni, will eventually have to find a new approach. Some already have. But deflecting, crossing your fingers, and hoping the war ends tomorrow will not be enough.