Poland defied the European Union’s unprecedented call for member states to punish it for failing to uphold the bloc’s values, signing into law a judicial overhaul that puts the country at risk of economic sanctions and losing its voting rights.

President Andrzej Duda announced the decision on Wednesday, hours after the European Commission said the government in Warsaw posed a threat to the rule of law by putting courts under political control and recommended triggering Article 7 of the EU treaty. The process is unlikely to lead to Poland being shut out of decision making. But, backed by German Chancellor Angela Merkel and French President Emmanuel Macron, it underscores the erosion of trust between the bloc’s largest states and some of its eastern members.

After years of juggling crises including Greece’s debt saga and the worst migration emergency since World War II, EU leaders are turning their attention to the rise of populist forces that reject the bloc’s values. The decision is a shot across the bow for governments such as Hungary’s, where Prime Minister Viktor Orban has called for rolling back the liberal framework underpinning the world’s largest trading club.

“Within a period of two years, a significant number of laws have been adopted, which put at serious risk independence of the judiciary and the separation of powers in Poland,” said Frans Timmermans, principal vice president of the commission. “The commission can now only conclude that there’s a clear risk of a serious breach of the rule of law by Poland.”

Long Procedure

The disciplinary decision, while damaging to Poland’s reputation, was expected by investors after Prime Minister Mateusz Morawiecki said his country wasn’t going to budge. The zloty lost 0.1 percent against the euro Wednesday, though remains this year’s second-best performer among emerging-market currencies.

While the EU gave Poland three months to address its recommendations, Duda signing the laws increases the risk of deeper acrimony. The legislation, an earlier version of which he vetoed amid nationwide protests, will force two-fifths of Supreme Court Justices to retire and give politicians sway over court appointments.

It’s time to end “communism inside the Polish judiciary,” Duda said. “I don’t see a problem with parliament having more influence over who becomes a judge.”

Hungarian Defense

Imposing sanctions needs unanimous support from the EU’s other 27 countries, which is unlikely because Hungary has vowed to shield Poland. Hungarian Deputy Prime Minister Zsolt Semjen said it’s unacceptable for Brussels to punish democratically elected governments.

“Both the Hungarian-Polish friendship and the Hungarian government’s commitment to treaties bind us to oppose the commission’s move,” Semjen said.

The Article 7 process may play an important role when EU members begin negotiating aid allotments in the 2021-2027 budget cycle. Poland is the biggest recipient of EU aid, which at roughly 10 billion euros ($12 billion) a year has driven growth since the country of 38 million joined in 2004.

“This isn’t just about Poland,” Timmermans said. “It’s about the EU as a whole, about who we are.”