It could have been inspiring. Imagine a university set up to educate some of the best students from Europe and beyond, and to provide a home for the world's most creative researchers in the natural sciences and engineering. It would be an institution with an outstanding new campus, benefiting from annual revenues of at least €500 million (US$700 million) — a pinnacle scholars would aspire to and entrepreneurs would move to be close to.

That is what the European Institute of Technology (EIT) might have been. It was what was implicit in the idea that the president of the European Commission, José Manuel Barroso, put forward under that name in 2005. The proposal that now goes by the name of the EIT is a paltry thing by comparison — a small, central, administrative executive that would select 'knowledge and innovation communities' (KICs) to fund research in promising-sounding areas. The KICs would be distributed networks made up of 'partnerships' between organizations in the education, research and business sectors, and would confer postgraduate degrees. The commission would contribute €2.4 billion between 2008 and 2013.

An expert group commissioned by the European Parliament to analyse this proposal recommended a different way forward last month. In this vision, too, there is no central EIT — but the KICs become genuine bricks-and-mortar institutes, 20 or so of them, each with 300-odd scientists, located in regions where there is already established research strength.

Parliament, however, seems not to be taking its experts' advice. Both it and the European Council — the two decision-making bodies of the European Union — are likely to approve the commission's lack-lustre notion of virtual networks. And both are downplaying the element of education, toying with the idea that the EIT and its components might offer some sort of watered-down postgraduate diploma without the clout of a PhD.

So Europe will get yet another virtual industry–academic network, to sit alongside the Framework Programme's Networks of Excellence, the EUREKA clusters and a welter of other variations on the theme. This shop-worn notion of the EIT has little if any support among researchers. Industry, too, finds it uninteresting.

This delocalized compromise marks a distressing loss of nerve. Europe has a demonstrated ability to deliver enduring world-class research institutions: the particle-physics laboratory CERN and the European Molecular Biology Laboratory stand as evidence. It has shown a willingness to invest in research excellence for its own sake, independent of political agendas — witness the fledgling European Research Council, flooded with applications in its first round of awards. If it chose to, why should the world's largest economy not set up a unitary engineering powerhouse to rival the Massachusetts Institute of Technology, with all the benefits that such scale and ambition confer?

This pitiable state of affairs highlights much of what is wrong with pan-European politics. One fundamental problem is that of 'subsidiarity', a principle embedded in the European Union's foundational Treaty of Rome that requires the commission to steer clear of functions that individual countries are considered to do well enough already, including the award of academic qualifications. Another is a chronic reluctance to commit to bricks and mortar for research.

The German presidency is keen to launch a 'test KIC' next year, specializing in energy efficiency or climate change. It will be a long way from a world-leading academic institution that would have inspired Europe's young people and stimulated its economies. The financial and constitutional challenges involved would have been undeniably great. But the outcome could have been fully worthy of the academic heritage that Europe possesses, and may have stimulated it to new heights. Is that vision now dormant? Or is it dead?