BRATISLAVA, Slovakia — Just days before Christmas, Hungary's new right-wing government, which now controls a near-invincible two-thirds of parliament, succumbed to temptation: It rubber-stamped a draconian-sounding new media law that looked as if it would slip a leash of censorship around the necks of both traditional and online media.

The law would have required all domestic and foreign-owned media, including websites and blogs, to register with the authorities. It could also smack media organizations with crippling fines if their coverage was deemed to be lacking sufficient "balance" or respect for "human dignity."

Moreover, all this would be interpreted and enforced by a new five-member "Media Council" -- each member tapped by the party that steers parliament. The Organization for Security and Cooperation in Europe was understandably beside itself, and a representative branded the new law as " unprecedented in European democracies ."

Hungary is already one of the most worrisome countries in Europe. One poll of ex-communist Eastern Europe suggests that Hungarians are the most disillusioned with democracy and capitalism. And in last April's elections, the European Union watched anxiously. Reigning Prime Minister Ferenc Gyurcsany had been caught in September 2006 lying about the country's economic woes, which incited the public and spurred a chain of events that decimated support for his Socialists. The right wing won big. Historically big. The leading opposition party, Fidesz, seized 53 percent of the vote; the scaremongering far right claimed a startling 17 percent, another landmark in the post-communist world.

In the months since, Fidesz and its parliamentary majority have tightened their grip by politicizing the Constitutional Court, central bank, state audit office, and the largely ceremonial post of president. Then came the media law.

For the European Union, the heavy-handed tactics of a ruling government in a smaller, ex-communist member might have been easier to ignore if not for the inconvenient fact that Hungary assumed the rotating EU presidency on New Year's Day. With Budapest holding the gavel -- and the limelight -- Brussels was red-faced. It responded to the new Hungarian law with unparalleled scrutiny , including a European Commission inquiry.

Besieged by bad press -- the Washington Post editorialized about the "Putinization" of Hungary , while the Guardian trumpeted the revival of " one-party rule " -- Prime Minister Viktor Orban and his government lashed out at Hungary's EU partners. Not only was Hungary unfairly being ganged up on, they charged, but it was the left-leaning members of the European Parliament conspiring to do so.

Nevertheless, Budapest vowed to amend the law. A government spokesman, Zoltan Kovacs, told Foreign Policy that his side viewed it all as a quibble over "technical issues." "We are most happy to clarify the law," he said then, "to make it more exact."

On the night of March 7, though, Hungary did more than clarify. Buckling under the pressure, the parliament struck and softened the law's most contentious points, though the Fidesz-dominated Media Council seems untouched, as does the potential for huge fines. The reversal came as no surprise to critics of the current government.

"The EU is very proud of its values and norms," says Peter Balazs, a former Hungarian foreign minister who helped pave Hungary's EU accession in 2004. "How can it defend those values to third partners -- like Belarus or Ukraine or China -- when they're not fully adhered to by its own members?"

This showdown, though, is about much more than Hungary. It's the latest watershed moment in the European Union's bumpy evolution over the past half-century. Not surprising, given that the "United States of Europe" started stretching eastward only seven years ago, expanding from 15 countries to today's 27 -- and now encompasses some half a billion people. Internally, tensions are rising between the East and West, the rich and poor, the large and small -- especially when domestic politics pit national sovereignty against European values.

In addition, post-communist members, once so eager to please Brussels and join the exclusive club, are now insiders. The Easterners no longer feel like second-class members, compelled to kowtow to their Western counterparts. Take tiny Slovakia, which spurned unanimity and infuriated fellow members of the eurozone as the only state to thumb its nose and refuse to join the massive bailout of Greece. Nor do they tolerate being talked down to, as in 2003 when French President Jacques Chirac chided the Poles , saying that by backing the U.S.-led war in Iraq, they "missed a great opportunity to shut up."

The new EU members "aren't students anymore, but equal partners who have learned all the tricks from sitting there," says Piotr Kaczynski, a Polish researcher with the Brussels-based Center for European Policy Studies. "They're fighting for their space, for their voice to be heard, individually and regionally. No one wanted to give them that space, naturally, so they have to fight for it."

Meanwhile, Brussels, long chastised for being toothless, is becoming increasingly assertive under European Commission President José Manuel Barroso , who is serving his second and final five-year term. Now free of the pressure to placate the boss -- the EU member states -- his commission is inching beyond its traditional role of enforcing technical rules on trade and economics, venturing into more politically sensitive issues.

Last September, for example, one commissioner compared France's deportation of Roma to Nazi-era ethnic cleansing , and the commission threatened Paris with legal action. That's a far cry from the decades of keeping your nose out of another's business.

"The idea has been that, unless absolutely necessary, we don't want to interfere in another's domestic politics because the next time it could be us in the dock," says Katinka Barysch, deputy director of the London-based Center for European Reform. "It's a very fine line, a balancing act. We have to weigh the principle of national sovereignty with the democratic standards we've all signed up for."

The origins of the growing confrontation between EU authorities and the continent's far-right parties could be seen back in 2000 , when Austria allowed the party of Jörg Haider, who had made controversial comments about his country's Nazi-era past, into the governing coalition. Fellow EU members assailed the move and feebly tried to isolate Vienna. The broader point was not just to reinforce European "values," but to send a message to then-aspiring EU members in the East, like Hungary: There are red lines you dare not cross.

At the time, the right-wing government of then, as now, Prime Minister Viktor Orban was flirting with Hungary's own far-right. Orban described Haider's electoral success as "a stone being thrown into an intellectually and politically stagnant pond." The EU reaction, he said at the time, "forces us all to think harder than usual about the deeper meaning of democracy."

But Hungary and other Eastern European countries still had many more hoops to jump through before they would enter the club. Brussels drove them forward, dangling carrot and stick. When EU accession arrived, in 2004, this leverage evaporated. The East rejoiced -- and exhaled. "In every single country, there was a degree of relaxation," says Kaczynski of CEPS.

His own country has since crossed swords with Brussels several times: for example, the so-called " vodka wars ," which restricted the definition of the liquor to the Polish specialty of potato- and grain-based spirits; demands that Poland's new EU voting rights should be greater considering the millions of its citizens killed by Germany; and Polish threats to mandate chemical castration for convicted pedophiles.

And when the Czechs took over the largely ceremonial EU presidency two years ago, it was Europe's enfant terrible, President Vaclav Klaus, who occupied the seat. Klaus had already gained notoriety by theorizing that the global economic crisis was spurred by too much regulation, not too little; brushing aside concerns of climate change as a "myth"; and even calling for the European Union to be "scrapped."

Yet it was Bulgaria that became a true test of the European Union's willingness to get tough. As the European Union's poorest, most corrupt members, Bulgaria and Romania were inducted in 2007 -- with strings attached. Bulgaria in particular had to pledge to crack down on rampant government corruption and dozens of mafia slayings that for years had gone unpunished.

By 2008, Brussels was fed up. It froze hundreds of millions of euros in EU financial aid to Sofia, an unprecedented penalty. It was a tough message not only to Bulgaria, but to fellow EU members plagued by corruption and Balkan countries, such as Serbia and Croatia, knocking on the door.

Today, once again, Brussels feels the need to send a message -- by flexing its muscles against Hungary. In this case, there was no need to utter an ultimatum: amend, or else. It seems that the will to name and shame a member state applies just enough pressure.

"Nobody wants to be in a position where they're vulnerable to constant criticism," says Gyorgy Schopflin , a Fidesz member of the European Parliament who is an advocate of tighter restrictions on the media. "It's unpleasant, and it's bad for the image."

Hungary, after all, remains sensitive to Western opinion. The Financial Times reported on March 4 that Orban's government has hired a London PR firm and lobbyist "to improve its battered public image and convince investors that economic and fiscal policy is in good hands."

After the March 7 vote in Budapest, European Commissioner Neelie Kroes announced that Brussels would be " quite active in monitoring " the law's application -- presumably with a hand from Hungarian watchdogs on the ground.

If the European Union's new name-and-shame tactic re-creates the lever, missing since 2004, to nudge Hungary and others toward better behavior -- and not revert to the old authoritarian reflex -- that's just fine by Hungarians like Balazs, the former foreign minister.

"With such a parliamentary majority in Hungary, and without sufficient opposition, it's very good for the whole country that we are now inside the EU, not outside," says Balazs, currently director of the Center for EU Enlargement Studies in Budapest. "What is missing inside the country, we get it from the EU family. That is where the pressure comes from. And there needs to be that pressure."

This dispatch first appeared March 9, 2011, in Foreign Policy .