Israeli politicians are seeking to separate the announcement of a new university in northern Israel from the crisis facing the country's higher education.
Movie mogul and arms broker Arnon Milchan pledged $100 million (£54 million) to support the university, as weeks of student demonstrations and strikes over the quality of higher education ended with a provisional agreement on extra funding.
Plans for the new institution were announced after Prime Minister Ariel Sharon and the Shinui party reached an agreement to increase the higher education budget by more than 315 million shillings (£38 million).
Under the agreement - which has yet to be finalised - 90 million shillings will be devoted to implementation of the Winograd Committee recommendations, including a further 3 per cent cut in tuition fees.
In 2001, the committee recommended that fees should be halved over a period of five years, with a 14 per cent cut in the first year and 9 per cent in subsequent years. However, these recommendations were never fully implemented.
The new university will be situated in the development town of Carmiel, designated for Israeli settlers, near the Lebanese border. It will combine the campuses of a number of colleges in the Galilee.
With the Technion-Israel Institute of Technology and Haifa University, it will be the third research university in the north of the country.
Moshe Klughaft, the National Union of Israeli Students spokesman, said the extra money was no more than honouring the committee's recommendations.
"Most of the 315 million shillings is going to academic institutions and not to students."
Some lecturers threw their support behind the students, including Avraham Hershko of the Technion-Israel Institute of Technology, a recent Nobel laureate for chemistry.
He predicted that Israel would "join the ranks of Third World countries and that there would be no more Israeli Nobel prizewinners" if it continued in its present direction.
The university's benefactor, Mr Milchan - whose companies produced the Hollywood movies LA Confidential and Pretty Woman - has been instrumental in a number of massive arms deals.
However, he denies that he is an arms dealer, maintaining he has sold military hardware to Israel only.