The paper investigates changes in institutional quality in countries at different stages of European integration over the seven‐year period from 2004‐11. It analyses two countries of the European Neighbourhood Policy (ENP) region, two from the Western Balkans and two EU Member States from South East Europe. The analysis reveals differences between the country groups in the extent of institutional convergence, in perceptions of corruption and in the pace of democratic consolidation. Analysis of changes in a newly constructed index of institutional quality in the public sector reveals a further falling behind the EU in some key dimensions. We conclude that the EU did not play an important role as a ‘transformative power’ in the two ENP countries over the period up to 2012, and that the process of institutional reform was incomplete due to an absence of a clear European perspective.