Economic Jolts Heighten European Universities' Concerns About Public Financing

By Aisha Labi

As global financial markets gyrate and national economies on both sides of the Atlantic face unfamiliar perils, the potential implications for higher education in Europe are worrying.

European higher-education systems remain for the most part publicly financed, and as cash-strapped governments have cut public spending in recent years, universities in several countries have suffered the consequences. This latest wave of economic turmoil could further hinder public financing for universities and alternative revenue streams, including philanthropy, on which many institutions have become increasingly dependent. Stubbornly high unemployment rates in several countries mean that young graduates are less likely than ever to find work, putting further strains on already-stretched social safety networks and pushing colleges to focus more on teaching job skills. And a readiness by young Europeans to take to the streets to protest austerity measures, as in Britain, Spain, and other nations, adds an unpredictable dimension to an already-volatile situation.

The European University Association, a Brussels-based organization that represents higher-education institutions and rectors in 47 countries, has been tracking the global economic crisis and its impact on higher education since 2008. In a report published in June, it said that, although the extent to which different countries have been shaken by the volatility varies considerably, "the economic crisis has left few higher-education systems unaffected."

Public money accounts for, on average, 75 percent of European universities' income, and such reliance on government financing "means that any change in this funding source can potentially have the highest impact," the report says. As with previous analyses, the association's most-recent report emphasizes that the impact of the financial turmoil on higher-education systems has varied significantly across Europe.

In some countries, including England, Greece, Italy, and Ireland, universities have been subjected to cuts of more than 10 percent. Greece's youth-unemployment rate of more than 40 percent is among Europe's highest, and its economy has been the focus of concerted European bailout efforts for the past several months. The report calls the situation there "critical," noting that the Greek student population "has been increasing while the government has been cutting higher-education funding by up to 35 percent over 2010 and 2011."

International focus has shifted in recent days to the ailing economy in Italy, where universities are facing severe cuts of 14 percent over the next two years, according to the report. "The situation appears critical as some 25 universities already face a default risk in the near future," the report says.

Each of the countries that has made what the report described as "major cuts" in higher-education spending has faced increasing financial pressure as the summer has progressed, amid fears of economic contagion spreading across Europe and growing speculation about which economies might be next in line for a costly bailout. Governments won't make decisions about budgets for several months, so exactly how the latest turmoil will hit higher education won't be known for some time. However, there can be little doubt that universities will eventually feel the impact.

France has been a bright spot, singled out by the European University Association for its government's ambitious stimulus package for higher education. The report noted that "the prospect for 2011 remains positive," with an additional projected increase of 4.7-billion, or $6.7-billion. But with rumors swirling of a potential downgrade of France's credit rating, following Standard & Poor's reduction of the U.S. rating, and with the French government seeking ways to trim its public deficit, universities in France could see a change in their fortunes.

Despite the uncertainty, some education experts are hopeful that universities will be able to ride out the economic upheaval largely unscathed.

"No one enjoys turmoil in the markets, " Joanna Motion, vice president for international operations at the Council for Advancement and Support of Education, wrote in an e-mail. The organization helps institutions with their fund raising. "But universities, by definition, are focused on big issues," she said. "They're here for the long haul."

As universities rely more on philanthropic giving to replace public financing, they have reason to remain optimistic that donations will continue to flow in, she said in an e-mail. "University campaigns these days are driven by transformational, high-end gifts. Money of that kind is genuinely global and fluid—and to some extent finds shelter from the storm."