Europe bulletin: VW cuts jobs, Chagos ruling stands, ECB wary on rates

Europe faces mounting economic and geopolitical strain as major developments unfold across the region.

Volkswagen plans deep job cuts after a sharp profit slump, while a UK court rejected a challenge to Britain’s Chagos Islands deal with Mauritius.

EU leaders warn Russia is benefiting from the escalating Middle East conflict, and European Central Bank officials are urging caution as volatile oil prices complicate interest rate decisions.

Together, the developments underscore the pressure confronting Europe’s economy and foreign policy.

Volkswagen to cut 50,000 jobs

Volkswagen has announced plans to eliminate 50,000 jobs across its German operations by 2030, as the automaker posted its worst financial results since the 2016 diesel emissions scandal.

Post-tax profits fell 44% to €6.9 billion in 2025, hammered by weak demand in China, Donald Trump's US import tariffs, and heavy costs tied to its electric vehicle transition.

CEO Oliver Blume disclosed the cuts in a letter to shareholders, saying the group is operating in a "fundamentally altered environment."

The latest round goes beyond the 35,000 job reduction already agreed with unions in 2024. Additional cuts will fall on Audi, Porsche, and software subsidiary Cariad.

Volkswagen employed around 287,000 people in Germany as of last year.

UK court blocks legal challenge to Chagos islands deal

London's High Court has refused permission for a legal challenge against Britain's foreign office over its sovereignty deal with Mauritius on the Chagos Islands.

Three claimants, including Bertrice Pompe, a British national born in Diego Garcia argued the foreign office unlawfully failed to consult Chagossians before signing.

Judge Mary Stacey acknowledged the "long and shameful history" of how islanders were forcibly removed in the 1960s and 1970s to make way for military facilities.

But she ruled the challenge was essentially a re-run of arguments already dismissed by English courts.

Under the deal signed last year, the UK transferred sovereignty to Mauritius while retaining a 99-year lease on Diego Garcia, home to a joint US-UK military base.

EU's Costa: Russia only winner of the Middle East war

European Council President António Costa told EU ambassadors in Brussels on Tuesday that Russia has emerged as the sole beneficiary of the escalating US-Israeli conflict with Iran.

"So far, there is only one winner in this war — Russia," he said.

Moscow is cashing in on surging energy prices, which are funding its war in Ukraine. It is also gaining from the diversion of Western military resources that would otherwise have gone to Kyiv.

And crucially, global attention has shifted away from the Ukrainian front. The comments came as oil prices crossed $100 a barrel following disruptions to Strait of Hormuz shipments.

Costa urged all parties to return to talks, warning that further escalation threatens Europe and beyond.

ECB urges caution as Iran war rattles energy markets

Two European Central Bank policymakers said Tuesday the bank should hold its course on interest rates despite rising pressure from the war in Iran and surging energy prices.

Lithuania's central bank chief Gediminas Simkus warned against reactive policymaking, noting oil prices swung from $120 a barrel on Monday to $90 on Tuesday alone.

"If you start thinking about monetary policy in the morning, you may end up with very different thinking in the evening," he said.

Estonia's Madis Muller agreed, but noted that the odds of a rate hike, rather than a cut, have risen in recent weeks.

Markets have now priced in a 50% chance of a mid-year hike. The ECB's next meeting is March 19.