Can sanctions and threats thereof strengthen democracy? – The “Rule of Law” conflict in the European Union

Most studies examining democratic backsliding in Hungary and Poland asked if the EU reacted coherently to the current “rule of law” crisis. Different types of literature explained the EU's "weak" sanctions policy with intergovernmental decision-making in the EU institutions, the fear of a "rally around the flag" effect, or symbolic/creative compliance in the member states (MS). However, less was said about how the EU's actions affect the implicated MS. Since 2020, the situation has become more dynamic. After the Art.7 and infringements proceedings were widely unsuccessful, the EU introduced new internal threat and sanction instruments in the form of the "rule of law conditionality" or the withholding of the national recovery programme of the Next Generation fund. In 2022, the EU treated the "receiver" states differently after the full-fledged Russian invasion of Ukraine. While the Hungarian government under Fidesz lived up to its name as Russia's "Trojan Horse" and became widely isolated in the EU, Poland became a model country for some member states in how it helped Ukraine in the war and pushed sanctions against Russia. In June 2022, the Commission and Council “rewarded” this by approving its national recovery programs in the Next Generation recovery funding framework while putting it on hold for Hungary. Also, Hungary was targeted in questions of the RoL conditionality, while Poland stayed widely unaffected. Building on and advancing the literature on economic sanctions, this article examines the intended and unintended consequences of the threat of financial and economic sanctions on both countries. First, it looks at how the backsliding governments reacted to introducing various EU tools and if their positions changed after the Russian invasion. Second, it examines the impact these actions have on public opinion in both states and if they help stabilize or destabilize the backsliding regime. This article finds that in both states, we find a two-level game on an international and domestic level. The preliminary evidence suggests that the threat of economic sanctions leads only to a slowdown rather than a reversal of democratic backsliding in the EU.