The creation of a Europe of knowledge has been a prime objective for the European Union since the Lisbon European Council of March 2000. Subsequent European Councils, particularly Stockholm in March 2001 and Barcelona in March 2002, have taken the Lisbon objective further forward. The Lisbon agenda calls for efforts from a wide range of players. These include the universities, which have a particularly important role to play. Given their central role, for universities the creation of a Europe of knowledge is a source of opportunity but also major challenges. Indeed, universities go about their business in an increasingly globalized environment that is constantly changing and is characterized by increasing competition to attract and retain outstanding talent, and by the emergence of new requirements for which they have to cater. Yet European universities generally have less to offer and lower financial resources than their equivalents in the other developed countries, particularly the United States. European universities as such have not recently been the focus of reflection and debate at European Union level. The Commission seeks to contribute to such a debate, and this Communication accordingly examines the place and role of European universities in society and in the knowledge economy (section 3), offers some ideas on universities in a European perspective (section 4) and sets out the main challenges facing the European universities, along with some issues for consideration (section 5). If it is to achieve its ambition of becoming the world's most competitive and dynamic knowledge-based economy and society, Europe simply must have a first-class university system--with universities recognized internationally as the best in the various fields of activities and areas in which they are involved. The questions raised in this document are intended to help in determining what action should be taken for a move in this direction within the enlarged EU. (Contains 28 notes.)