Radical plans to create a French "Ivy League" are gathering pace as the first winners of a new elite universities scheme worth €7.7 billion (?6.6 billion) start to receive cash.

The Initiative d'Excellence (Idex) scheme is part of the biggest shake-up in French higher education for almost 40 years. It is designed to establish five to seven "world-class" universities capable of competing internationally for the best students and academics.

Driven by President Nicolas Sarkozy, the proposed "Sorbonne League" will require non-selective universities, the highly selective grandes ¨¦coles and France's independent research organisations, such as the National Centre for Scientific Research, to work together for the first time in exchange for investment.

Three of these academic "clusters" - the University of Bordeaux (which comprises eight institutions), the University of Strasbourg (a merger of three Strasbourg universities, various grandes ¨¦coles and specialist schools) and the University of Paris Sciences et Lettres (integrating 13 institutions) - were selected in late June for a state endowment of €1 billion each, which should yield an annual income of up to €40 million.

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Initial funds of €10 million will be given to each of these clusters over the next few months to push forward the reforms and the endowment in early 2012.

A second call for Idex members is under way and three or four more groupings will be selected for endowments, while partial mergers of other universities and grandes ¨¦coles will create 15 to 20 more comprehensive universities.

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Such heavy investment in the context of cuts in other public funding and fears over the level of national debt is not, however, the most revolutionary aspect of the project.

Backing selected universities will lead to a stratification of the French system that runs contrary to the existing egalitarian model, in which all French universities are considered more or less equal and students in general attend their local institution.

Edouard Husson, vice-chancellor of the universities of Paris, said that establishing a hierarchy of universities was vital to competing on the international stage.

"Regional universities will be very successful in certain fields and will be important in terms of improving students' employability," he said.

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"But our hope is that there will be four comprehensive universities in Paris and at least two will be very competitive."

Universities, grandes ecoles, specialist schools and research organisations will retain their often unique legal status, staff and selection procedures despite the mergers, but the new partnerships may allow universities to be considered as a single entity and therefore climb world ranking tables, in which France has performed poorly in recent years.

The universities that receive endowments will also be required to work more closely with business to commercialise research and form spin-off companies.

Nearly €22 billion from a €35 billion "Investing in the Future" fund will be focused on higher education, with independent experts picking the best ideas, rather than ministers.

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"We are open to business - this is a huge change," said Laurent Wauquiez, minister of higher education and research. "If you had asked a professor 10 years ago if he had any links with business, he would have said, 'No - I am not here to provide slaves for companies.' Now these two areas are working together."

jack.grove@tsleducation.com.