Money Talks? The Effectiveness of Sanctions in the ‘Rule of Law’ Conflict in the European Union

Abstract The European Union (EU) responded to democratic backsliding in Hungary and Poland by implementing a sanctions toolbox, which includes the Article 7 Treaty on European Union (TEU) mechanism, infringement procedures and funding conditionality. Whilst the Article 7 TEU procedure has been extensively studies and found to be ineffective, the efficacy of infringement procedures and the recently introduced funding conditionality – comprising the Conditionality Regulation, the Recovery and Resilience Facility and the Common Provisions Regulation – remains less understood. Drawing on the sanctions scholarship, we identify two central determinants for sanction effectiveness: the credibility of sanctions imposition and their economic costs. We then explore how they influence the effectiveness of the sanction mechanisms introduced by the EU by testing four hypotheses. The findings indicate that both infringement procedures and funding conditionality are only partially effective. This comparative analysis enhances our understanding of coercive mechanisms that can mitigate decline in democratic governance.