A report adopted by the European Parliament points to the need for changes to the rule-of-law conditionality mechanism. Experience to date—particularly the blocking of EU funds for Hungary over breaches of the rule of law—shows that, in the next financial perspective, the mechanism requires a number of adjustments to function more effectively. At the same time, there are voices arguing that it should be abolished altogether, claiming it has become a tool of political pressure on Member States.
The conditionality mechanism has been in force since 1 January 2021. It introduced the principle of “money for the rule of law,” meaning that the disbursement of EU funds may be made conditional on an assessment of compliance with rule-of-law standards where their breach could threaten the EU’s financial interests. It is only one element of the EU’s broader toolbox for safeguarding the rule of law and the Union’s budget, alongside the European Commission’s annual reports, infringement procedures, and oversight by the Court of Justice of the EU.
“This is a strictly legal mechanism, consistent with the Treaties, as confirmed by the Court of Justice in the cases brought by Hungary and Poland against the European Commission. But it undoubtedly also has a political dimension—it signals that a given state is breaching EU values and losing credibility. That, too, matters on the international stage within the European Union,” says Michał Wawrykiewicz, a Member of the European Parliament from the Civic Coalition, in an interview with Newseria.
So far, the mechanism has been formally applied only once—against Hungary—which permanently lost €1 billion due to suspended EU payments. According to the European Parliamentary Research Service (EPRS), the case exposed several shortcomings, including unclear criteria for triggering the procedure, lengthy decision-making processes, and the European Parliament’s limited role in the process. In December 2025, a report adopted by the Parliament’s Committees on Budgets (BUDG) and Budgetary Control (CONT) concluded that implementation of the mechanism needs improvement. The committees called for simplified procedures, greater transparency and effectiveness, and better protection of the EU’s financial interests.
“The key takeaway from the mechanism’s operation so far is that there are deficiencies in its effectiveness. In practice, it has only been tested on Hungary—and it did have an effect,” Wawrykiewicz assesses. “The goal of the EU and its institutions is to impose sanctions on governments of Member States that have rule-of-law problems and diverge from EU values, while ensuring that EU citizens, who are not at fault, do not suffer as a result.”
Within the European Parliament, work is under way on possible ways to strengthen the mechanism, including the introduction of so-called “smart conditionality.” According to EPRS analyses, this solution would allow funds to be directed straight to final beneficiaries—local governments, universities, NGOs, or businesses—bypassing the central administration of the sanctioned state.
“At the request of the Committee on Civil Liberties, Justice and Home Affairs (LIBE), compliance with the independence of the judiciary is also to be explicitly included in the conditionality mechanism,” Wawrykiewicz explains. “This aspect would be taken into account when applying the mechanism. An independent judiciary and prosecution service guarantee that EU funds can be properly allocated and effectively overseen. Corruption mechanisms simply cannot function where the courts and prosecutors are independent.”
Some MEPs argue that the lack of clear thresholds for triggering the mechanism and the lengthy procedures weaken its effectiveness, especially in situations requiring swift action. The parliamentary committees’ report highlighted obstacles that hinder activation of the mechanism and stressed that any decision to suspend EU funds must be based on “clear, objective, and transparent criteria,” rather than negotiations. A majority of MEPs support releasing frozen funds only after a Member State has fully implemented the required reforms.
Any changes to the conditionality mechanism will have direct implications for the shape of the EU’s next financial framework after 2027, in which linking funds to rule-of-law assessments may be extended to additional budgetary instruments.
“Every decision under the mechanism can be subject to judicial review by the Court of Justice of the European Union. There is therefore a balance between political and strictly legal elements. In my view, the mechanism works, although it should be improved in certain respects,” Wawrykiewicz emphasizes.
However, the rule-of-law conditionality mechanism also has a substantial group of opponents.
“The greatest risk of the rule-of-law mechanism is its politicization and overt use against states that do not conform to the European Commission’s main political line. We saw this, for example, in the case of Poland, when funds were repeatedly blocked under the Law and Justice government,” says Tomasz Buczek, an MEP from the Confederation party. “We see what is happening today with Viktor Orbán’s government, and we fear what comes next, as the Commission under its current leadership increasingly pushes through harmful policies—often against conservative states that challenge the prevailing line, whether on climate policy, trade agreements with Mercosur countries, or loans for Ukraine.”
The MEP describes the mechanism as a tool for intimidating Member States.
“This mechanism should be abolished. It is a carrot-and-stick approach: if you are obedient, you are rewarded and your funds are not blocked—but you must accept the line proposed to you. If you protest or push back, you are hit with the stick and your money is frozen. We do not accept such a policy by the European Commission toward Poland, Hungary, or other countries,” Buczek stresses.
He adds that the Commission’s role should be limited to distributing funds that originate from the Member States, and that existing oversight tools exercised by the European Parliament are sufficient to monitor fund management.
“I see no need to multiply institutions or create mechanisms like the one we are discussing. ‘Money for the rule of law’ is not the direction the European Union should take. The path chosen by the European Commission and the European Parliament is fueling a growing wave of Euroscepticism across Europe,” the Confederation MEP concludes.
