It blames France and Germany which are criticised for mediocre education systems and their inherent class bias.
“France and Germany, which make up 35 per cent of the European Union’s economy, are no longer among the world’s leaders in developing knowledge and skills,” the study said.
China and India, on the other hand, are starting to deliver “high skills at low costs and at an ever increasing pace”.
The report’s author, Andreas Schleicher, makes five main recommendations.
He said countries must set up a network of diverse, high-quality institutions free to respond to demand and accountable for their results.
Access to schools which are better and fairer has to be improved, and public and private funding must be encouraged.
Universities must also evolve in a way that matches their strategies to those of modern enterprises, the report said, recommending that they be governed by bodies other than just academic ones.