The European Union's Response to the Rule of Law Crisis and the Making of the New Conditionality Regime

Democracy has been central to the process of European integration. Even though common values were not explicitly mentioned in the first treaties, political elites sought to confer upon the European project a clear raison d'être beyond establishing the market and economic co-operation between states. The Declaration on Identity, adopted in 1973 by the European Council, underlines the principles of representative democracy, the rule of law (RoL), social justice and respect for human rights as the 'fundamental elements of the European identity'. The debate on common values intensified in the 1980s and 1990s. Not only was the European Union (EU) preparing its Eastern enlargement, but radical-right parties were also gaining influence in Western Europe (Kitschelt and McGann, 1997). To safeguard the common values enshrined in Article 2 of the Treaty on European Union (TEU), the Treaty of Amsterdam introduced Article 7 TEU, which allows suspending the Council voting rights of Member States failing to respect these values. In 1999, the inclusion of Jörg Haider's far-right Freedom Party in the Austrian government revealed the limitations of Article 7 TEU. The 14 Member States suspended their bilateral relations with Austria but did so outside the framework of Article 7 TEU (Merlingen et al., 2001). Although Article 7 TEU was amended to include a preventive phase1 through the Treaty of Nice (Kochenov, 2017), the question of how and on what basis one can determine the breach of common values remains open to interpretation. These limitations re-emerged later, but in a rather different political context. The 2010s revealed the fragilities of Central and Eastern European democracies when former liberals such as Viktor Orbán turned into supporters of 'illiberal democracy' (Buzogány and Varga, 2018), a contradiction in terms because democracy without rights is not democracy at all (Lacroix and Pranchère, 2019). What started as a domestic crisis (in Hungary in 2010 and Poland in 2015) developed into a full-fledged crisis challenging the EU's internal and external identity (Hillion, 2023). After more than a decade of the RoL being a contentious issue on the EU's agenda, in this review, we provide an overview of the EU's responses. Is the EU better equipped to safeguard its values in the context of increasing backsliding in several Member States? Whilst often criticized for a lack of political will and for being slow and ineffective, the EU's emerging RoL regime could be seen as a reflection of political actors' preferences and their power relations in parliamentary, supranational and intergovernmental arenas. The response to the dismantling of the RoL in certain Member States indirectly corresponds to a complex process of building the EU's political authority. Involving key actors with different sources of legitimacy in a complex process of building political authority beyond the nation-state requires time, deliberation and contestation. Designed not 'by stealth' but through political debates in different institutional arenas, this new RoL regime strengthens de jure the political authority of the EU vis-à-vis its Member States. Its de facto implementation is open to interpretation, and its effectiveness will depend on both internal and external factors. We discuss this trajectory, focusing on the politics of the RoL crisis, from 'actions without sanctions' (Section I) and the incremental choice of hard and soft policy instruments (Section II) to the emergence of a new RoL conditionality regime (Section III) and its challenges (Section IV). We conclude by highlighting five lessons with political implications (Section V). The perceived success of the Eastern enlargement began to crumble in 2010, when Viktor Orbán's Fidesz party won the elections in Hungary by a landslide. Fidesz turned out to be a regional trendsetter, followed by the Romanian and Polish governments in limiting judicial independence – a sine qua non of EU membership (Kochenov, 2008). Evidence of a more profound crisis of liberalism was also seen in Bulgaria, Slovakia and Malta (Dawson and Hanley, 2019). However, EU institutions were slow and divided about what action to take in response, as well as when and how (Coman, 2022). Whilst the European Parliament (EP) repeatedly called on the Commission to trigger Article 7 TEU against Hungary, the Commission and the Council often deplored the lack of tools other than Article 7 TEU and infringement proceedings. The emerging RoL debate focused mainly on policy tools but gradually came to be about the EU's political authority in its relations with the Member States. For EU institutions, the question of RoL became heavily politicized and opened up new institutional conflicts. Scholars argued that the perpetual search for new RoL tools masked the lack of political will to address the issue and that EU institutions have developed a 'rhetoric of inaction' (Emmons and Pavone, 2021). In the meantime, the Commission reduced the use of infringements through 'forbearance' (Kelemen and Pavone, 2023, p. 781), understood as a 'deliberate and revocable underenforcement of the law' that was not driven by a lack of capacity but implied a deliberate political choice not to enforce the law. Party politics partly explain the EU's (in)action (Herman et al., 2021). In national parliaments, populist parties provided flank support for the Polish and Hungarian governments (Granat, 2023). At the EU level, the EP's capacity to act was limited by partisanship. Whilst Liberals, Social Democrats and Greens have called on the Commission and the Council to activate Article 7 TEU against Hungary, the European People's Party (EPP) shielded Hungary's Fidesz for several years (Kelemen, 2017). It took the EP eight long years to trigger Article 7 TEU against Hungary in September 2018, whilst the Polish Prawo i Sprawiedliwość (PiS) government has benefited from the support of its European Conservatives and Reformists (ECR) group. The Social Democrats and the Liberals were less reluctant to detach themselves from their Romanian, Czech or Maltese party members in power when RoL was under debate (Coman, 2022). Despite strong partisanship in the early 2010s, the EP has been the most active institution in publicly discussing the state of democracy, RoL and fundamental rights (Herman et al., 2021). The other part of the story is explained by intergovernmentalism. Whether it was the situation in Hungary or Poland at stake, the Council has tried to mask the divisions between its Member States.2 Despite the acceptance of the RoL as a common value, no rotating presidency was ready to put the Article 7 TEU procedure on the agenda (Hernández, 2023). Instead, the Council created its own tool: the RoL Dialogue. Initiated by the Netherlands in 2014 with the support of Belgium and Germany, this intergovernmental dialogue became 'a façade tool' and a repeated source of disappointment in a context of rapid deterioration of the RoL. However, as autocratization advanced in Hungary and Poland, some governments became more inclined to act than others (Blauberger and Sedelmeier, 2024), whilst most newer Member States invoked diplomatic, administrative or political reasons to justify their silence (Coman and Thinus, 2024). Despite the six hearings with Hungary and Poland each and several 'state of play' updates, Article 7 TEU came to a standstill and was turned into a 'long monologue' (Coman and Thinus, 2024; Priebus, 2022). In May 2023, after the sixth hearing with each country, the Vice President of the Commission, Jurova, concluded that 'serious concerns remain' (Agence Europe, 31 May 2023). Moderating between the EP and the Council, the Commission has acted cautiously (Closa, 2019). The Commission avoided triggering Article 7 TEU, which was unluckily termed by former President Barroso as the 'nuclear option', even though there was nothing 'nuclear' about it (Kochenov, 2017). The metaphor reinforced the unwillingness of EU institutions to act (Pech, 2022), as the Commission was also reluctant to use more conventional tools it had in its hands, such as infringements. The number of infringements launched by the Commission declined by 67% between 2004 and 2018 (Kelemen and Pavone, 2023). Whilst the von der Leyen Commission's contribution to agenda-setting on the RoL was inconsistent, the Court of Justice of the European Union (CJEU) became an active player in response to cases brought by the Member States or to preliminary ruling proceedings addressed by judges and professional associations to confirm the validity of domestic decisions or interpret EU law. According to Mandujano Manriquez and Pavone (2024, p. 1), 'brick by brick', the Court 'imposed novel obligations on EU Member States to safeguard the rule of law while expanding the legal basis for the EU to sanction governments breaching the Union's fundamental values'. In June 2023, the CJEU held that the law on the Ordinary and Supreme Courts adopted in December 2019 in Poland infringed EU law. In October 2021, the Court started fining Poland €1 million per day for ignoring its ruling concerning the suspension of the controversial reforms, but in April 2023, the Court lowered the penalty from €1 million to €500,000, given domestic progress. The RoL crisis has led to the adoption of several new policy instruments, including both preventive/informative soft tools (such as the European Semester, the Rule of Law Framework, the EU Justice Scoreboard and the Rule of Law Annual Report) and hard/sanctioning instruments (such as Regulation 2020/2092 on the general regime of conditionality for the protection of the EU budget). Each instrument has been highly contested and shaped by the preferences of the main EU institutional actors (Coman, 2022; Priebus, 2022). Together, they consolidate the EU's political authority vis-à-vis its Member States. The new soft instruments empowered the European Commission not 'by stealth' but by discourse (Coman, 2022). They have strengthened the Commission's influence over the Member States' judicial systems, as well as its expert authority, by gaining monitoring and assessment capacities. Through the European Semester, established in 2010 to co-ordinate the macroeconomic policies of the Member States in the aftermath of the Eurozone crisis, the EU Justice Scoreboard (2013), the Rule of Law Framework (2014) and the Annual Rule of Law Report (2020), the Commission obtained new powers to assess and provide recommendations to Member States for improving the effectiveness and independence of the national judiciary systems or to prevent 'systemic threats' by establishing a dialogue before triggering Article 7 TEU (Kochenov and Pech, 2016). The quest for hard instruments emerged as a last resort in 2018, when the Commission proposed the establishment of a general regime of RoL conditionality. Conditionality, as such, is not a new principle of governance and has been used in the EU since the end of the 1980s to encourage structural reforms, following the model of international financial institutions (IFIs) such as the World Bank and the International Monetary Fund (IMF). The Commission has gained considerable experience using conditionality in the enlargement process, even if, in hindsight, conditionality was no cure against corruption or democratic backsliding. Despite the political and academic controversies regarding its limited impact (Jacoby and Hopkin, 2020), conditionality has been mainstreamed in the EU, moving from macroeconomic conditionality in the Economic and Monetary Union to the respect of the Charter of Fundamental Rights under Cohesion Policy (Baraggia and Bonelli, 2022; Becker, 2024). Regarding the RoL, the Commission waited until May 2018 to propose a regulation on a general regime of conditionality. Suspending EU funds when Member States fail to respect the RoL has remained politically and legally disputed. Initially strongly focused on RoL, the Commission's proposal underwent a significant shift by becoming a regulation about the EU's budget (Baraggia and Bonelli, 2022; Coman, 2022, p. 195). Whilst the EP supported the Commission's proposal, it was met with scepticism in the Council, not only by Poland and Hungary but also by other Member States, which seemed to be more 'interested in discussing the limits of the Commission's powers rather than addressing potential or actual systemic breaches of EU values amongst its members' (Kochenov and Pech, 2016, p. 1072). Whilst successive Council presidencies kept discussing the Commission's proposal at the technical level without much progress, only 2 years later the fate of this proposal was decided: in July 2020, amidst the COVID-19 pandemic, the European Council agreed to establish the Next Generation EU programme. In the Council, the German presidency tried to accommodate the preferences of all Member States by keeping Poland and Hungary aboard. Yet, the more it tried to satisfy the two countries, the greater the risk that the regulation would be rejected by the Member States supporting strong RoL conditionality. Not only did the Commission's initial proposal get significantly watered down (Baraggia and Bonelli, 2022; Hillion, 2023), but once adopted in December 2022, the European Council postponed the long-awaited application of Regulation 2020/2092 establishing a general regime of conditionality for the protection of the EU budget by inviting the Commission to put forward implementing guidelines. With the COVID-19 pandemic, the Resilience and Recovery Facility (RRF) has brought all conditionalities under the umbrella of a new complex and comprehensive regime. To qualify for Next Generation EU funds, Member States must draft National Recovery and Resilience Plans (NRRPs). The RRF is linked to various conditions, including macroeconomic conditionality and consistency with the European Semester, and is directly managed by the Commission in accordance with Regulation 2020/2092. Payments are conditional on the Commission's positive assessment of the progress made by the Member State. In this new conditionality regime, the allocation and suspension of funds under the Cohesion Policy are decided by the Commission. In contrast, under the RRF and Regulation 2020/2092, decisions are taken by the Council on the basis of the Commission's proposal. The Commission plays both a political and a technocratic role, whilst the EP's role has remained rather marginal. On paper, conditionality helps to depoliticize debates and conduct the assessment process under clear and strict conditions. In reality, however, these assessments remain disputed (Thinus, 2024). As discussed in the next section, the implementation of the conditionality regime depends not only on domestic change but also on power relations in the Council and between the Commission and the Member States concerned. The previous sections have detailed the inertia of EU institutions and the incremental policy process in the face of the RoL crisis. Whilst such patterns of muddling through are typical of EU institutions, how can we account for the marked policy change from 'actions without sanctions' (Soyaltin-Colella, 2022) to the use of spending conditionality against Poland and Hungary under the new conditionality regime? First, the incremental policy process at the EU level created the tools needed for 'biting intergovernmentalism' (Kochenov, 2015). Still, at the same time, it also increased the public salience of RoL debates in some pivotal Member States (Blauberger and Sedelmeier, 2024), with implications for the Council. Mainstream parties faced the rise of populist challenger parties, many of which were in cahoots with Fidesz and Law and Justice in forming a transnational populist alliance (Granat, 2023). The threat of disrupting intergovernmental policy co-operation moved even previously reluctant Member States to support the application of the conditionality regime in the Council (Blauberger and Sedelmeier, 2024). This did not stop intergovernmental bargaining. Second, domestic political will is crucial. The relationship between the Commission and the Hungarian government was particularly tense when Fidesz's rhetoric vis-à-vis the EU radicalized (Bohle et al., 2023). However, the substantial size of the EU Cohesion Funds and the RRF opened windows of opportunity for Hungarian authorities to co-operate with the Commission rather than merely contest its authority. Against this backdrop, the Hungarian government initiated a process of change to meet the milestones and super milestones agreed upon with the Commission. In contrast, before the 2024 elections in Poland, the PiS government had been less inclined to pursue reforms to restore the independence of the judiciary or to comply with the Charter of Fundamental Rights. Both Poland and Hungary threatened to block unanimous decisions if the funds were not disbursed. The discussion of the mid-term review of the EU's Multiannual Financial Framework in July 2023 is illustrative in this regard. The two countries made their agreement conditional on the release of the RRF. Third, the changing external context has also influenced the EU's response to the RoL crisis. After Russia launched its full-scale war against Ukraine on 24 February 2022, the RoL debate was relegated to the background and forbearance was partly revoked (Coman, 2022, p. 190; Hernández and Closa, 2024, p. 23). This led to a differentiation between Poland and Hungary already before the electoral defeat of PiS, with the Commission prioritizing the response to the war over responsiveness to RoL enforcement (Hernández and Closa, 2024). Whilst the Polish PiS government supported Ukraine in many ways, the Hungarian Fidesz government not only aligned with Russia but in 2023 also blocked – or threatened to block – decisions requiring unanimity to adopt sanctions against Russia, to increase the EU's support for Ukraine in the European Council, or regarding Sweden and Finland's North Atlantic Treaty Organization (NATO) membership (Holesch and Zagórski, 2023). The new instruments strengthened the EU's contested legitimacy in dealing with the RoL concerns of the Member States. But are they effective? So far, the EU has managed to resort to 'the power of the purse' to suspend portions of Cohesion Funds, the disbursement of RRF grants (Fisicaro, 2019) and to protect the Union budget in the event of breaches of the RoL affecting the EU budget. In the case of Poland, on 1 June 2022, the Commission positively assessed Poland's Recovery and Resilience Plan, which the Council approved on 17 June of the same year. Several laws had been adopted by the Polish PiS government in 2023 that the President of the Republic referred to the Constitutional Tribunal for review. However, the Commission also decided to refer Poland to the CJEU for the violation of EU law by the same Constitutional Tribunal (European Commission, 2023, p. 9). The political change in Poland in October 2023 has improved relations between the government and the Commission. In December 2023, the Polish government joined the 'Friends of the Rule of Law' group in the Council and declared its intention to end the Article 7 TEU procedure by restoring the RoL in the country. As a result, in February 2024, the Commission approved the payment of €6.3 billion under the RRF (from a total of €59.8 billion) following domestic measures that improved the judiciary's independence by reforming the judges' disciplinary regime. At the same time, the Commission found Poland to be fulfilling the horizontal enabling conditions related to the Charter of Fundamental Rights and provided access to up to €76.5 billion of previously blocked Cohesion Funds. In addition, in May 2024, the Commission found that Poland had launched a series of legislative and non-legislative measures to restore the independence of the judiciary and that there is no longer a clear risk of a severe breach of the RoL in Poland within the meaning of Article 7(1) TEU. EU Member States in the Council welcomed this decision, with the exception of Hungary. This reminds us again that a conditionality regime should not be idealized in the absence of domestic political will, but also that domestic political will and symbolic rather than substantive compliance are rewarded at the EU level. In the case of Hungary, not only was the RRF amount (€6.5 billion in grants and €3.9 billion in loans) blocked, but the Commission also suspended 55% (€6.4 billion) of three Cohesion Policy programmes. In addition, under the Common Provision Regulation (Cohesion Policy), the Commission blocked almost €22 billion in EU funds for the non-fulfilment of horizontal enabling conditions. The Hungarian government committed to implementing reforms intended to strengthen the independence of the judiciary, which were adopted by the Hungarian Parliament in May 2023. In December 2023, the Commission recognized Hungary's judicial reforms as meeting some of its requirements in terms of judicial independence and allowed it to claim reimbursements of up to around €10.2 billion as part of the Cohesion Policy (European Court of Auditors, 2024, p. 33). Coincidence or not, this decision was taken before the European Council meeting in December 2023, which will be remembered as the one before which a row of EU officials and heads of Member States paid a visit to Viktor Orbán in Budapest to find a compromise on EU support for Ukraine that he threatened to block. In March 2024, the EP Committee on Legal Affairs voted to take the Commission to Court over its decision to unfreeze EU funds for Hungary. It remains to be seen whether Article 7 TEU will be on the Council's agenda during the controversial Hungarian Presidency from July to December 2024, at the request of the Commission and/or other Member States. Despite the decision to disburse EU funds, the effectiveness of compliance with the new conditionality regime remains open to interpretation. Very much like in the case of the conditionality-led Eastern enlargement, what the Commission can assess is formal change rather than substantive transformation. Studies taking a closer look at elites and societies in democratically backsliding states show the stable presence of sovereigntist, Eurosceptic positions in the public sphere (Buzogány and Varga, 2018; Wunsch and Gessler, 2023). This raises the question of whether the new RoL conditionality regime will backfire and reinforce anti-EU positions. As it so often does, the academic debate provides contradictory findings regarding the way forward. On the one hand, there are warnings about strengthening anti-EU and illiberal political forces due to EU interventions (Schlipphak and Treib, 2017). On the other hand, EU interventions provide opposition forces with opportunities to question their government's democratic credentials (Wonka et al., 2023). Public opinion surveys do not point to further backlash amongst the domestic public because of EU interventions (Toshkov et al., 2024). Whilst condemnation of undemocratic positions is strong (Wunsch and Gessler, 2023), the EU's efforts receive little domestic support and seem unlikely to generate public pressure for reforms (Toshkov et al., 2024; Wonka et al., 2023). Over a decade into the RoL debate, the ongoing autocratization in one of the EU's Member States marks a critical juncture in the history of democracy in Europe. What have we learned from this ongoing crisis and its political and societal implications within and outside the EU? We conclude by highlighting five lessons. The first lesson is that crises occurring within Member States often transform into questions about the nature of the EU polity. Above all, the debate about respect for the RoL marks a step forward in constructing the EU's political authority. This debate has brought to the fore fundamental questions not only about the meaning of the RoL and its reconfiguration at the European level but also about respect for the RoL by the EU itself. Although the resulting conditionality regime can be ridiculed as being too modest, it represents an incremental institutional achievement if seen as an example of building political authority in a complex, multilevel field populated by many actors. What is important is that this new regime emerged from deliberations about common values across several interlinked institutional arenas – the EP, the Commission and the Member States in the Council, as well as national parliaments – each with its own source of legitimacy. Though the academic RoL debate often downplays these deliberative aspects whilst accusing the EU of being undemocratic, the imperfect and ambiguous RoL regime stands on more solid footing than previous EU crisis reactions. Let us remember that while the EU acted swiftly during the eurozone crisis, the undemocratic nature of decisions kept haunting the EU system during the following decade. The second lesson is that if RoL policy instruments result from bricolages, their implementation depends on a wide range of factors, both internal (in particular, inter-institutional relations between the three main EU institutions and the balance of power within the Council) and external (such as the war in Ukraine or the challenges of future enlargements). This gives rise to questions about their consistency. The political context in the Member States cannot be ignored either. Article 7 TEU was introduced when far-right populist parties were emerging in Western Europe and Eastern Europe. We face similar times following the 2024 European elections and several national elections all over Europe: Wilders' Partij voor de Vrijheid (PVV) in the Netherlands, Chega in Portugal, Rassemblement National in France, Alternative für Deutschland (AfD) in Germany, Freiheitliche Partei Österreichs (FPÖ) in Austria, Fidesz in Hungary, the Slovak Smer and Fratelli d'Italia might get company not only in the EP but also in the Council. How these parties will shape the domestic political context will determine the fate of the EU's political authority in implementing the conditionality regime to safeguard its values. This leads to a third lesson concerning the need for RoL mitigation and an early warning system. The Polish and Hungarian examples show that once the tipping points are reached, the sequences of democratic backsliding occur in a systemic manner that is difficult to stop. This is even more important as the electoral defeat of the Polish PiS in 2023 shows us that once destroyed, the RoL cannot be restored overnight without respecting democratic procedures. For democracies, time is a vital resource. The fourth lesson concerns the effectiveness of the conditionality regime. The transformative power of the new conditionality regime should not be idealized. What we know about the EU's enlargement conditionality and other conditionality regimes in IFIs is that conditionality often fails if it focuses merely on formal rule application. Conditionality was no cure for the RoL prior to EU accession, and contradictory conditions have likewise given space to 'creative' or fake compliance. Instead, mobilizing change-minded, heterogeneous coalitions proved to provide more sustainable change (Dimitrova and Buzogány, 2014). Fifth and finally, whilst the effectiveness of the EU's RoL conditionality regime mainly concerns the internal workings of the EU, we should not forget about its external credibility (Burlyuk et al., 2024; Hillion, 2023). The RoL crisis and the waves of democratic backsliding within the EU have raised serious doubts about its role as a democratic role model. This calls into question the sustainability of the previous conditionality-led regime that underpinned Eastern enlargement, which was hailed as the most effective instrument of external democratization. It is not only the emergence of RoL-related issues in countries such as Poland and Hungary that sends negative signals, but so do the indeterminate actions of the main EU institutions to deal with the internal problems effectively. This will reduce the influence of EU foreign policy abroad, particularly as it engages in wide-ranging accession negotiations with countries in its neighbourhood. Georgia already provides a warning example. Whilst RoL diplomacy has been a core feature of EU external policies, the long silence of the EU over the last decade has allowed ruling elites in neighbouring countries to block RoL reforms. Paradoxically, it is the Russian war in Ukraine that keeps the positive image of the EU in the neighbourhood states intact – more by default than by its own activities. We would like to thank the co-editors of the Annual Review – Journal of Common Market Studies, Elena Baracani, Gianfranco Baldini and Sorina Soare, as well as Sonja Priebus, for their helpful comments on earlier drafts. The work of Aron Buzogány on this paper was supported by the Hungarian Academy of Sciences Distinguished Visiting Fellowship 2023.