Can the EU maintain regional influence as the Euro's woes consume its material resources and the migrant crisis erodes its reputational wealth? The proposed paper offers an evidence-based answer, focusing on the least-likely and crucial policy area of human rights. The European neighborhood policy (ENP) contains two distinct mechanisms through which the EU hopes to influence its neighbors: material incentives, and socialization. The former uses financial rewards to encourage countries to change their policies in line with the EU's policy prescription. The latter uses interaction and communication to encourage countries to model their policies on the example provided by EU countries. The paper models these two mechanisms and analyzes their impact on ENP participants' human rights policies, using a spatial econometric approach and estimating data on 31 countries from West-Asia, North-Africa and Eastern-Europe, in 1990 through 2015. The results indicate that the EU's ability to push its norms through in neighboring countries is conditioned by the amount of financial resources it invests in those countries. Therefore the EU cannot hope to "rule by example" in the absence of financial incentives. However the results further indicate that reductions in amounts of financial incentives induce non-compliant countries to subsequently change their policies and comply with EU requirements. Hence, the EU can maintain regional influence through the use of punishments to non-compliant countries, even when its normative reputation is weakened and when its financial resources are limited. The paper discusses the theoretical and policy implications of these findings. The results support rationalist theories of the EU's external influence, but a "pinch of constructivism", in the form of positive example setting by EU countries enhances the effect of rational mechanisms. From a policy perspective the EU should either focus efforts on intra-EU compliance with externally promoted policies, or bolster the external use of sticks.
