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A Global Crisis: New Report Looks at the Effects of the Economic Recession on European Universities

May 26, 2010

The European University Association recently released a report on the impact the economic crisis has had on financing for national universities across Europe. The report reflects challenges in both public and private funding for European research and higher education.

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Higher Education: A Commitment to the Future

American colleges and universities aren't the only ones suffering from the economic downturn. In their latest financial monitoring report, the European University Association (EUA) found that crucial national funding for higher education has been cut by at least 10 countries, and that other governments have failed to fulfill commitments to increase investments in higher education. Private funding is also down, which has had a negative impact on university autonomy.

Public funding cuts have had an uneven effect on European universities, depending on how each school allocates its budget. Teaching has been most effected in Belgium (Flanders), Estonia, Hungary and the UK, where reductions in teaching budgets have led to fewer educational programs, reductions in employees and faculty salary cuts. Greece, Ireland and Latvia have also been forced to slash university employee salaries, and Estonia and Latvia have both report hiring freezes. Because student numbers have been rising in Europe just like they have in America, staff and program cuts have been especially crippling.

Poland and Austria's universities have felt the strongest effects in research funding. Organizations like the Austrian Science Foundation have seen big budget cuts, and universities are afraid that even basic research will be impacted.

In 2002, the European Commission at the Barcelona European Council called for European Union members to invest 3% of their GDP in research and 2% specifically in higher education. The EUA's current report echoes their 2009 Prague Declaration, in which the organization called on governments to renew their commitment to the 'Barcelona target.'

There are over 5,000 universities in Europe, all of which depend even more heavily on government funding than American public colleges and universities. The Prague Declaration reminds European nations that higher education is crucial to the process of economic recovery, and that 'through research-based education at all levels we provide the high-level skills and innovative thinking our modern societies need and on which future economic, social and cultural development depends.'

Public Funding Crisis for Euro Universities

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Public Funding Sees Broad Cuts

The EUA has been tracking the impact of the economic crisis on European universities since 2008, which has allowed the organization to monitor changing financial trends since the beginning of the crash. The biggest public funding cuts have happened in Latvia, which slashed 48% of its higher education budget in early 2009. The country cut another 18% in 2010. The EUA blames these drastic reductions on pressure from the International Monetary Fund (IMF) and the World Bank, which recommended that Latvia enact major cuts in public higher education funding. The current report notes that Latvia's universities are just beginning to see the major structural and operational changes that will result from this huge budgetary shift.

Although no other countries have cut funding on that scale, several have enacted heavy cuts of 5-10 percent. Italy has introduced a 10% reduction over the course of three years. Estonia cut 7% in 2009 and 10% in 2010, and Ireland cut 5.4% in 2009 and 9.4% in 2010. Romania's cuts have totaled 10% and Lithuania's are at 8%, and the UK plans to cut 6.6% between 2010 and 2013. A number of Eastern European countries are enacting smaller cuts of 5% or less, including Croatia, the Czech Republic, Macedonia, Poland and Serbia.

In other European nations, universities have been affected by indirect financial pressure. Although neither the Netherlands nor the Nordic countries (Denmark, Finland, Sweden and Norway) have reported funding cuts, universities have been under financial strain from growing student numbers without corresponding budget increases. And several countries have eliminated previous plans to increase higher education funding, which has left universities scrambling to adjust their budgets. Hungary canceled its 2007 plans to increase overall university funding, leading to a 15% reduction in expected financial support, and the Flemish Community in Belgium has instituted a funding freeze in place of a promised 10% increase. Spain and Austria are also instituting changes in their funding structures that will reduce universities' research capacities.

The news isn't all bad, however. Germany has actually increased federal investment to the tune of 800 million Euros (EUR) in the German state systems that support higher education and research institutions. They also plan to invest another 2.7 billion EUR between 2012 and 2015 in the German Excellence Initiative and have committed to a 5% per year funding increase until 2015 for the Innovation and Research Pact.

France has also increased its higher education spending. It will invest almost 30 billion EUR in 2010 in areas such as research development, campus improvements, new campuses and 'the overall quality of higher education.' And while Portugal had enacted funding cuts in previous years, its government has committed to a new investment of 100 million EUR in higher education to make up for previous shortfalls.

EU Considering Tuition Like UK

Conflict Over Proposed Tuition Fees

The EUA also looked at changes in private funding, which has become increasingly important to European universities, allowing them to become more financially stable and diversify their income streams.

One controversial source of private funding is tuition. Most European universities have traditionally been tuition-free, but the recession has led to a public debate on adding tuition fees to make up the public funding gap. Students have argued that higher education should continue to be offered for free as a public good, but several countries are beginning to institute tuition fees for select programs. Many have also introduced tuition charges for foreign students. The UK, one of the only EU countries that already had tuition fees, is also considering an increase.

The organization had a harder time uncovering changes in other sources of private funding because there is less available data. They found no direct impact on collaborative projects between universities and industry, but did collect individual reports of difficulty starting new projects from a number of countries.

Another indirect effect on private funding comes from foundations, which represent a potential source of income for many universities. As the crisis has reduced most foundations' budgets, their contributions to higher education may be reduced significantly for years.

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