The most common and most likely answer to this crossword clue is the 5 letter word WE’RE
I've seen this crossword clue in The Guardian
W
E
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R
E
Buddy explains!
The straight part
We know that "we are diminished" is the straight/definition part of the clue. The straight part is often a synonym or definition, in this case we are diminished = we’re.The cryptic/wordplay part
In cryptic crossword there's often an wordplay/cryptic part as well.This part involves a more complex hint, such as an anagram, homophone, hidden word, etc.
Sadly, We don't have an explanation for this specific crossword clue yet.
What does WE’RE mean?
WE’RE noun- A man, a husband
- A fine for slaying a man; weregild.
- The collective name for any kind of person that changes into another form under certain conditions, including the werewolf.