Euro capital thus diminished Italian car (5)
I believe the answer is:
sofia
'euro capital' is the definition.
'sofia' can be an answer for 'capital' (capital of Bulgaria). I'm not sure about the 'euro' bit.
'thus diminished italian car' is the wordplay.
'thus' becomes 'so' (synonyms).
'diminished italian car' becomes 'fia' (I am not sure about this - if you are sure you should believe this answer much more).
'so'+'fia'='SOFIA'
Can you help me to learn more?
(Other definitions for sofia that I've seen before include "Bulgarian capital" , "European city" , "Balkan capital" , "capital place" , "Bulgarian city" .)