Europe
Why Rishi Sunak?

Rishi Sunak of the Conservative Party has become the new leader of the UK after the end of Liz Truss’s brief 49-day prime ministerial term. Sunak has become the new prime minister without even needing British citizens’ votes; following the resignation of Boris Johnson, together with Liz Truss, he was one of the new candidates for prime minister but had lost the race to his predecessor.
Brought down by Truss and Sunak, Boris Johnson’s understanding of the economy during and after the Covid crisis was somewhat “heterodox” and “populist”: Contrary to the general downsizing trend in western countries, Johnson had prioritized economic growth and low taxes and declared that he favored measures to pump demand. In fact, Johnson had signaled that he could implement state-led fiscal policies that were not well received by the mainstream.
Boris Johnson took office after the Brexit process, when Britain left the EU, and acted to bring his country back on the world stage as a strong player. When Covid was added to the great recession that plagued capitalist economies, Johnson’s “unstable” actions lead to his downfall. Johnson, who wanted to pursue a looser monetary policy, was thought not to have a coherent and comprehensive economic policy towards the Bank of England’s and the finance’s “orthodox” understanding.
And that’s when Liz Truss became Johnson’s successor. In her debate with Sunak, she also talked about economic growth and the reduction of taxes. She also tried to implement this plan: a $50 billion tax deduction package came into effect to be compensated by borrowing, but the response of the “markets” was harsh. Sterling has declined to unprecedented levels, panicked investors have sold $500 million in assets, and the real estate industry is on the brink. The Bank of England launched an emergency bond-buying program to prevent pension funds from going bankrupt, and the IMF criticized Truss and urged her to reconsider the program.
Perhaps the sign of the resignation came from her ally on the other side of the Atlantic: on October 16, US President Joe Biden called Liz Truss’s tax package a “mistake”. Liz Truss had already begun her U-turn and fired finance minister Kwasi Kwarteng, but it was too late.
Britain’s stalemate
We must accept that Sunak “warned” Truss in a way. During the debate, he said that Truss’s promises of tax cuts, borrowing and economic growth were unrealistic and argued that these policies would not work in an inflationary environment: Raising borrowing to historic and dangerous levels would mean pouring gasoline over the fire.
Speaking to the Financial Times before Truss’s resignation, he said the new prime minister and the new government’s overriding priority was to control inflation. He explains that Truss’ unfunded debts will exacerbate the situation and fuel inflation, and calls out directly to her, “Liz, we have to be honest. Borrowing your way out of inflation isn’t a plan, it’s a fairytale.”
Thus, ex-Goldman Sachs executive and parliament’s richest deputy, Rishi Sunak, emerged as a heartfelt supporter of monetary policies in developed capitalist countries: focusing on fighting inflation, cutting spending, raising interest rates, tight monetary policy. The new prime minister says he supports the Bank of England’s “independence” but promises tax cuts only after inflation is controlled.
But the dilemma persists. Britain went into recession as of October, according to polls published by Financial Times. Interest rate increases and monetary tightening have not been able to reduce inflation fueled by rising energy costs due to the Ukraine-Russia war and sanctions imposed on Russia. Sunak’s plan to cut expenditures seems to trigger the social crisis even more, given the increasing number of people in need of help in society. Besides, when he was the Ministry of Finance between 2020 and 2022, Sunak brought in the highest taxes Britain had seen since the 1950s. Again, even though he preaches “discipline”, Sunak promises higher public expenditures.
There is no jolt in the foreign policy line
Sunak was a supporter of Brexit policy, but there are those in his party who think he has too much sympathy for Brussels. The debate on the Northern Ireland Protocol (NIP) will also be a test for Sunak in this sense. NIP kept Northern Ireland within the EU’s integrated market for goods; it left it loose on its border with the Republic of Ireland and subjected it to additional controls in trade with the rest of Britain. NIP, signed by Boris Johnson in 2020, is criticized by Sunak, but Sunak believes a more conciliatory language is needed, unlike the hardcore Brexiters in his party.
Rishi Sunak, on the other hand, wants to tighten border controls, especially on the issue of immigrants, and to get rid of the European Court of Human Rights (ECHR) “obstacle.” Arguing that the ECHR was exploited by “lefty ” lawyers and its designation was gradually expanding, he said that the option to leave the ECHR was also on the table. Sunak also supported the plan to send asylum seekers to Rwanda.
Stressing the “special relationship” between the United States and Britain in a phone call with Joe Biden, Sunak reiterated his support for Ukraine and said they would stand up to China. In Ukraine, the prospect of Boris Johnson’s return was welcomed, and after Truss’s resignation, the government’s official Twitter account even tweeted about Boris and quickly deleted it, but Sunak’s appointment of the ministries of defense and foreign affairs to Ben Wallace and James Cleverly, who also served in the previous cabinet, was recorded as a gesture that Ukrainian politics would remain unchanged. It was also meaningful that Sunak’s first telephone conversation as prime minister was with Ukrainian leader Volodymyr Zelenskyy. However, Sunak does not support Liz Truss’s and Ben Wallace’s promise to raise defence spending to 3% of GDP. In addition, allies of Johnson’s pushed rumors that during his polemic with Sunak, the new prime minister was less committed to the war than Johnson, and a deal would one day have to be done with Putin.
Internal tensions of the Conservatives and The Talented Mr. Sunak
On the other hand, Sunak is not settled on a solid ground within the party. Boris Johnson’s leadership was the result of contradictions within the Conservative Party (Tories). Most of the Tory MPs in parliament depend on the politics of low taxation and free market sovereignty. But on the other hand, especially representatives from the northern regions of the party demand more government spending, a larger and more interventionist state, and they are very influential within the party.
The Northern Research Group (NRG), an influential team within the party, called on Liz Truss to continue the Tories’ levelling-up policy in the 2019 election manifesto. The NRG is composed of Tories selected from regions traditionally held by the Labour Party and wants more investment in the north.
Johnson chose to manage these contradictions rather than solve them. He was both conservative and pro-free market; he had promised to increase government spending and cut taxes. His speeches in the Brexit campaign included “more prosperity, less Europe”, “more freedom, less regulation”, “more dynamism, less migration.”
Apparently, Rishi Sunak is the answer given in Britain to these contradictions and the current trends of world capitalism. The economy needs to be reorganized under titles such as “green transition” and large investments are required, and the public power needs to increase at a time when private sector investments are in the bottom due to the crisis. The distance between capital groups and the state should be shorter. In addition, the ongoing war in Europe means that the regulatory authority of the state over the society is also extended to wider areas.
All this highlights a figure like Rishi Sunak. He is the member of an Indian family, who were cooperative during the colonial period, ex-Goldman Sachs manager; wealthy; professional and self-educated child of cooperative families of former colonial countries who had migrated to the West in the 1960s and had the opportunity to get into good universities…
Europe
AfD officially labeled ‘proven far-right extremist organization’ by BfV

Germany’s domestic intelligence agency, the BfV, has officially classified the right-wing Alternative for Germany (AfD) party as a “proven far-right extremist organization.” This decision is based on allegations that the party is engaged in activities contrary to constitutional principles and allows for more intensive surveillance. Interior Minister Nancy Faeser claimed that the AfD discriminates against citizens of foreign origin.
The Federal Office for the Protection of the Constitution (BfV), Germany’s domestic intelligence agency, announced that it has officially classified the right-wing Alternative for Germany (AfD) party as a “proven far-right extremist organization.”
The BfV’s announcement indicates that the AfD is no longer merely under suspicion. The agency claims to have definitive evidence that the party is working against Germany’s democratic system.
According to a report by the German public broadcaster ARD, the 1000-page internal report forming the basis of the decision refers to violations of fundamental constitutional principles such as human dignity and the rule of law.
This classification marks the first time in modern German history that a party represented nationwide in parliament has been officially defined as extremist.
Some state-level AfD organizations in eastern states like Saxony and Thuringia had previously received this label.
While this step does not mean the party is banned, it allows German authorities to intensify surveillance, including the use of confidential informants and technical monitoring under judicial oversight.
The decision also raises political tensions, as established parties will face increasing pressure to refuse cooperation with the AfD at any level of government.
Furthermore, the decision could fuel calls for an official party ban, but such a step requires the approval of the constitutional court and the support of the government or parliament, which means a challenging legal and political struggle.
Outgoing Interior Minister Nancy Faeser, in a separate statement, said the party was campaigning against the democratic order.
Faeser said, “The AfD represents an ethnic understanding that discriminates against all population groups and treats citizens with a migration background as second-class Germans.”
The minister added, “The party’s stances on ethnic issues are reflected in racist statements, especially towards immigrants and Muslims.”
The AfD had caused controversy when its officials described Germany’s Nazi era as “bird droppings” in the country’s history of over 1000 years.
Before the parliamentary elections in February this year, US billionaire Elon Musk had supported the AfD, saying the party was “the only party that can save Germany.”
The party came second in the elections with 20.8% of the votes, after Merz’s CDU/CSU alliance, which received 28.6%.
However, recent polls show the AfD closing the gap with German conservatives. A poll published last week by the public opinion research company Forsa showed the AfD at 26%, ahead of the CDU/CSU (24%).
Faeser stated that there was “absolutely no political influence” in the BfV agency’s findings, which were based on the 1100-page report.
Europe
EU prepares ‘Plan B’ for potential Trump withdrawal from Ukraine talks

The European Union (EU) is preparing a “Plan B” aimed at preserving economic sanctions against Russia, in case the Washington administration under Donald Trump chooses to withdraw from the peace process in Ukraine and pursue rapprochement with Moscow.
EU High Representative for Foreign Affairs and Security Policy Kaja Kallas stated in an interview with Financial Times that Brussels is making preparations in this direction.
Kallas said, “The main issue is whether the Americans themselves want to withdraw. We see signs that they are considering the possibility of abandoning the [peaceful solution] in Ukraine and trying to reach an agreement with Russia, because this is very difficult.”
According to the Financial Times report, Trump’s proposals to re-establish economic ties with Russia as part of a peace agreement are raising concerns within the EU that some member states might demand the lifting of European sanctions against Moscow.
Officials are concerned about the potential consequences if US companies can cooperate with Russia while European companies remain prohibited.
Kaja Kallas stated that the EU could potentially overcome a potential veto by Hungary if it blocks the extension of restrictive measures against Russia in July, but noted that the priority is for all member states to agree on sanctions.
Kallas used the phrase, “There is a Plan B, but we must work on Plan A; because otherwise, if you focus on Plan B, then it will be needed.”
The official added that Brussels is discussing the continuation of restrictions with Washington and other international partners.
Politico previously wrote that at least six EU countries, including Czechia and Belgium, support moving the restrictions to the level of national laws.
These countries hope that this step could “weaken Budapest’s ability” to block the extension of sanctions in the future.
According to the Financial Times, Brussels has also considered the possibility of using the Belgian King’s decree from 1944 to protect Russia’s frozen assets worth 190 billion euros held at the Belgium-based depositary Euroclear.
The US warned in mid-April that it might withdraw from the resolution process if it did not see progress in the coming days.
The White House announced that Trump was disappointed with both Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskyy and called on the parties to sit at the negotiating table.
Trump, however, said he had set a deadline for signing a peace agreement but did not specify a clear timeframe.
In Europe and Ukraine, it is thought that Trump is ready to use the small progress in negotiations as an “excuse” to claim “his job is done” this week, which coincides with the 100th day of his return to the White House.
Europe
German automakers report sharp profit drops amid US tariff uncertainty

Leading European car manufacturers Volkswagen (VW) and Mercedes-Benz reported sharp drops of around 40% in their profits in the first quarter of 2025.
According to Der Spiegel, the companies attributed this situation to a weakening Chinese market, rising costs, and uncertainties regarding US tariff policies.
The Volkswagen Group, headquartered in Wolfsburg, announced that its net profit in the first quarter of 2025 fell by approximately 41% compared to the same period last year, decreasing to 2.19 billion euros.
Revenue from the company’s joint ventures in China, one of its key markets, decreased significantly, while losses in the battery business increased.
Special costs amounting to billions of euros also contributed to the profit decline. In contrast, the group’s revenue increased by approximately 3% to 77.6 billion euros.
Like VW, Stuttgart-based Mercedes-Benz was also negatively affected by weakening business in China in the first quarter.
The company announced that its operating profit fell by over 40% to 2.3 billion euros.
Mercedes-Benz also stated that it would no longer provide an annual forecast due to uncertainty in US tariff policies.
The company, listed on the Dax index, expects significant impacts on its results if current and announced US import tariffs continue until the end of the year.
The volatility in US President Donald Trump’s tariff policy and its effects on the automotive market are so uncertain that the business development for the rest of the year cannot be reliably assessed, it was stated.
Harald Wilhelm, Chief Financial Officer of Mercedes-Benz, stated in a conference call that if the current tariff policy were to extend over a full year, it would reduce the targeted return on sales (profit as a % of revenue) in the passenger car business by approximately 3 percentage points.
Wilhelm stated that this situation could jeopardize almost half of the passenger car profit.
Currently, car imports into the US are becoming more expensive due to a 25% tariff.
Tariffs for car parts are also planned to be effective from May onwards.
Yesterday, US President Trump announced that he would mitigate the consequences of the special tariffs he had implemented. Companies producing vehicles in the US are particularly expected to benefit from this.
Stellantis, the parent company of Opel, also withdrew its annual targets in the face of increasing uncertainties due to US tariff policy.
The company, which includes brands such as Fiat, Peugeot, and Jeep, reported that the impacts on sales volumes and the competitive environment are currently difficult to estimate.
General Motors had also withdrawn its annual targets for similar reasons.
Stellantis experienced a 64% profit drop in 2024 and burned over 6 billion euros in cash, particularly due to weak business in the US.
In the first quarter of 2025, the group’s revenue fell by 14% to 35.8 billion euros.
VW is also acting cautiously. Although the group confirmed its annual forecast, this forecast still does not include the tariff effects.
The Wolfsburg-based group had previously presented preliminary figures regarding daily operations.
Special issues such as carbon dioxide provisions in Europe, restructuring at the software subsidiary Cariad, and provisions set aside for the diesel scandal led to additional costs of approximately 1.1 billion euros, reducing the operating result by approximately 37% to 2.9 billion euros.
Arno Antlitz, Chief Financial Officer of VW, stated during the presentation of the figures, “The group needs to secure a competitive cost structure to remain successful in a rapidly changing world.”
Antlitz added, “Especially because global economic conditions are currently so uncertain, we must focus on what we can influence ourselves.”
Many car manufacturers, including Volkswagen, and representatives from other sectors had recently warned about the potential consequences of tariffs in a joint letter.
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