Crafting enforcement, money talks: the EU Conditionality Regulation case

The Conditionality Regulation, which ties the access to EU funds to compliance with the rule of law (RoL) in areas that directly impact the Union’s financial interests, has marked a turning point in the EU’s RoL enforcement toolkit. Today, though, we lack a theoretical parsimonious account on why the Conditionality Regulation gained political feasibility. Following Closa and Palestini (2018), we argue that, contrary to which is often the case for democracy clauses in regional organisations, the development of Regulation does not align with the tutelage and regime survival theses, i.e. decision-makers adopt democratic clauses in the hope of enforcing them themselves or in response to domestic threats. Instead, it corresponds more closely to the societal demand thesis, where governments use the international arena to signal their responsiveness to domestic public opinion. Decision makers proposed and supported the creation of a democracy clause to respond to domestic demands for locking in fiscal protection preferences, and, thus, the negotiation and adoption of the Regulation was very much embedded within those logics that guide EU’s fiscal governance. The Regulation therefore moves RoL enforcement further away from the supranational and judicial dynamics prevailing in most cases of EU law enforcement (e.g. competition law), and closer to fiscal policy, where enforcement depends on a complex interplay between the Commission and the Council. Empirically, the process is traced through interviews with key EU officials and public documents and statements made by EU actors.