Co-operation between universities and industry is the "cornerstone" of modern higher education, the European Commission has told academics and industry leaders.
Addressing delegates at the European University Business Forum last week, Jan Figel', the Commissioner for Education, Training, Culture and Youth, said there was "large untapped potential" in the European higher education sector to establish closer links with business.
"We cannot afford to have the worlds of education and business not speaking to each other," he said.
The commissioner called for an "environment of trust" to be developed between academia and industry that would allow business representatives to be involved in curriculum development, and bring universities closer to the needs of the labour market.
But he also insisted that the relationship should be a two-way street.
"There is a great deal that universities can contribute to companies. For instance, they can stimulate work in interdisciplinary teams, in which they excel. The tricky part is finding the right balance between traditional academic values and new demands."
Mr Figel' also warned European governments and industry leaders not to react to the economic downturn by slashing investment in education.
"I want to be blunt here: these would be big mistakes. Cutting investment in education or research would destroy capital and knowledge, and compromise Europe's growth and employment prospects in the medium and longer term.
"In fact, this is the time to invest more, not less, in education research and innovation. Only a well-educated and well-trained workforce will allow Europe to stay competitive, create jobs, keep its prosperity and maintain its influence on the world scene," he claimed.