GERMAN students went on strike in many cities last autumn. Unlike student strikers of more "revolutionary" times, they were not demanding fundamental changes in society, but simply reform of ÖйúAƬ.

The strikes had mass appeal, but were conducted in an orderly and focused manner. Moreover, the students were joined by politicians proclaiming sympathy from all the main parties. So what was all the fuss about? Could Germany not just get to work and, indeed, reform ÖйúAƬ?

The demand was not new. Detlef Muller-Boling, director of the Centre for the Development of ÖйúAƬ in Gutersloh, argued in The THES in August 1995 that rigid institutional structures, inequality and an administrative and legal corset were stifling initiative. Far-reaching reform was necessary.

Any one who knows German ÖйúAƬ can hardly disagree. The quality of teaching is generally low. The number of foreign students is decreasing. Even research is suffering measurably. Nevertheless, Professor Muller-Boling ended on an optimistic note: the financial strain that had produced the crisis could force German states to be innovative in running ÖйúAƬ. While this would not be an all-out reform, a more diversified system might eventually be better able to renew itself.

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Why are the structures so rigid? First, almost all institutions, with the exception of a few business schools and one small university, are public owned. Even the one private university receives hefty subsidies from public coffers. Second, ÖйúAƬ is a mirror of West Germany's postwar consensus society. Under the decentralised post-1945 constitution, the Lander or states control ÖйúAƬ. The federal government provides funds for infrastructure, research and the living expenses of eligible students; the states pay salaries, operating expenses and a share of the research funds.

Third, many Germany professors still cultivate a detached air. Assistants often conduct their lectures, teaching loads are extremely low and performance standards are mostly non-existent.

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Since 1970, the number of new students a year has roughly doubled from 170,000 to 330,000, and so have absolute student numbers. There are about 15 per cent more scientific personnel. Higher education spending, as a share of gross domestic product, meanwhile has declined by roughly 20 per cent.

In 1997, the federal ministry for education and research and the Lander finally agreed on a reform of the federal framework law for ÖйúAƬ, the Hochschulrahmen-gesetz. Paradoxically, the reform solved some of the problems by not addressing them. The law will encourage innovation and diversity of institutions and introduce an element of inter-institutional and inter-state competition.

But the scope for reform is still narrow. The states are allowed to experiment with various financing regimes - formula-based funding and the management structure for universities and polytechnics.

Some of the most pressing issues, however, are not addressed. The issue of tuition fees, for example, has largely been avoided. Students' financial contribution remains marginal and the system will remain state-financed. Admission policies have not been addressed. Students who have passed their Abitur will still be distributed by a central agency according to capacity and social concerns, not according to performance. Institutions will not be able to select students, making inter-institutional competition a toothless tiger. Finally, professors and employees will remain lifelong state employees, thus further reducing incentives for performance and change.

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In early November, President Herzog, a professor of constitutional law before becoming a state minister, president of the supreme court and ultimately the holder of the highest office in Germany, said: "Our universities are not good enough nor fast enough any more. This message should hit our country as the Sputnik shock hit the United States in 1957. Cosmetic surgery won't do."

He called for an education system that was international, diverse, allowed for competition and an efficient use of resources.

A few weeks after this speech, the student strikes materialised. Will this confluence of events be sufficient to produce the necessary change? Financial necessity will force the Lander to experiment. In Lower Saxony, a central evaluation agency will start its work. Northrhine-Westfalia and other states are experimenting with formula-based financing regimes. Bavaria will relinquish state control and allow institutions to introduce boards of trustees similar to those of US universities. In Baden-Wurttemberg, students will have to pay some tuition fees if they study longer than the normal course of study would take. The state also allows some universities to select up to 40 per cent of their students - an almost revolutionary step in Germany.

All this is encouraging. It is also unlikely that the chain of reforms will come to a grinding halt. Of greater concern is the speed with which reform is possible. Every year counts for a nation as dependent on the international economy and its human capital as Germany. Its competitive industries are still largely those of the late 19th century - automobiles, machine tools, chemical, optoelectronics. Innovative approaches are necessary in today's global economy, but they are exceedingly rare. I am afraid that much more remains to be done to produce the big bang that will help make Germany fit for the 21st century. Mr President, please keep pushing! Students, keep on striking!

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Max Otte is global ÖйúAƬ specialist for Arthur D Little International Inc.