Political developments in South Eastern Europe raise serious doubts about the prospects for the effectiveness of the European Union's external democracy promotion via political conditionality. They make it questionable whether the European Union (EU) can repeat its success story as it is widely acknowledged in Central Eastern Europe. With reference to countries characterized by legacies of ethnic conflict, this article shows that incentive-based instruments only trigger democratic change if certain domestic preconditions are met. It will be argued that if national identity runs counter to democratic requirements, this will 'block' compliance by framing it as inappropriate action. The argument is empirically demonstrated using the example of one of the most problematic issue areas in Croatia, for which the EU has only partially succeeded in bringing about democratic change: the prosecution of war crimes.

The Western Balkan countries are stuck in a hybrid status quo on their way to democracy. Traditional arguments related to cost-benefit calculations, national identity or conflicting objectives fail to explain the observed decoupling between gradual improvements in formal compliance with membership criteria and stagnating, if not declining, democratic performance. We explain the limited impact of the EU's political conditionality in the Western Balkans with rampant state capture and proceed to unpack how EU conditionality has effectively contributed to the consolidation of such detrimental governance patterns. First, EU pressure for simultaneous economic and political reforms opened opportunities for business actors to build powerful clientelist networks that reach into politics. Second, top-down conditionality has weakened political competition and mechanisms of internal accountability and deliberation. Finally, formal progress towards membership and high-level interactions with EU and member state officials legitimize corrupt elites. A congruence analysis of the Serbian case provides empirical evidence for the hypothesised linkages between EU conditionality and state capture.

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