“If the European Union won’t pay, we’ll apply to China.” These words of Hungarian prime minister Viktor Orbán, spoken in Berlin earlier this month, refer to his country’s infrastructural needs, but the remarks derive more from Orbán’s compulsion to taunt Brussels than from any immediate prospect of significant Chinese investment.

Both Hungary and Poland have for some time been at loggerheads with the EU over a nexus of issues relating to what is called “the rule of law” but which actually involve something as fundamental to European values as our understanding of democracy. Having failed to progress by negotiation, the Commission initiated what is called an article 7 procedure against Poland over new laws that in its view seriously compromise judicial independence.

Article 7 operates in two phases. If the first, which might be regarded as a warning shot, proves ineffective, the second, which requires unanimous backing from member-states, can involve sanctions – up to and including suspension of the offending state’s voting rights.

Next month member-states will consider whether they should move to the second stage against Poland. Such a move is unlikely, first because of a reluctance to push article 7 proceedings – seen as the “nuclear option” – to their conclusion, and second because unanimity is not achievable: it is quite certain that Hungary will support Poland in its current difficulty, as indeed Poland would support Hungary. Article 7 therefore is a dead end.

The dispute between Poland and Hungary on the one hand and most other European states on the other boils down to a disagreement over the nature of democracy. The majority view in Europe endorses liberal democracy, a system in which the power of government is complemented and balanced by that of an independent judiciary, a free media, a fair electoral system and thriving civil society organisations.

Orbán however openly favours a “non-liberal state” or a “work-based state”, seeing liberal values as inimical to success in “the great global race”, a race in which Russia, China and India are identified as among the strongest contenders. This view, at least partially shared in Warsaw, constitutes a clear challenge to European values.

Given the ineffectiveness of article 7 procedures, some have argued in favour of hitting Poland and Hungary in the pocket when structural fund allocations are negotiated for the period after 2020. Though this path too has its dangers, the fact remains that the EU is a community of values and not just of interests and the illiberal challenge must be faced. In the long term Budapest and Warsaw would be unwise to think they can maintain their defiance on such an important matter entirely without cost to themselves.