Outside Europe it may be hard to imagine the scale of the triumph involved in the creation of a Europe-wide agency for competitive basic research, along the lines of the US National Science Foundation. After what seems like another hundred-years' war, a solution to member countries' concerns — that they must pay into a pot that then funds researchers elsewhere — has finally been found in the form of the European Research Council (ERC). It launches to great fanfare in Berlin next week. Importantly, it is committed to funding the best science, free of regional and political agendas.

The first call for grant applications will be restricted to young investigators, with a second call, for advanced investigators, to be announced later in the year. But too few European universities are ready to host the recipients.

The grants, which can run for up to five years, will be big: between €100,000 (US$130,000) and €400,000 per year, and deliberately designed to be prestigious. With a budget of only €300 million this year, competition will be particularly stiff (although annual funds will rise to €1.5 billion by 2013). The two-tier application procedure will be handled by twenty panels of experts, five in social sciences, eight in physical sciences and seven in life sciences. With the advice of specialist referees that they themselves select, the panels will judge the applications on the basis of merit, without reference to the nation involved.

But they will also assess the ability of the host institute to offer an appropriately supportive environment. This means providing genuine access to good infrastructure and a vigorous intellectual environment — not least to encourage applications for the grant's attendant posts from the best graduates and postdocs.

Researchers applying to the ERC must choose their host institute, and if their home base doesn't offer them much of a package, they can approach any other university or research centre. The phrase “without reference to nation” may at this point begin to seem disingenuous. Some countries are relatively inflexible in the conditions that their universities can offer individual scientists. Their universities may not, for example, be able to offer a salary attractive by local standards if they are hampered by fixed salary scales.

In short, the most flexible universities will be best placed to attract ERC grant holders. This is as it should be. The ERC is in effect a wake-up call for universities to free themselves of their chains and become internationally competitive.

It is fortuitous for Germany that it currently holds the rotating European Union (EU) presidency, and therefore hosts the launch of the ERC — part of the EU's Seventh Framework Research Programme, which runs until 2013. The German government is currently trying hard to loosen the chains around the country's universities, forged during the 1970s' anti-elitist movement that rigidly imposed equal status on them. Similar events squeezed competition between universities out of other European countries such as France and Italy, which are now also trying to recover. The former communist Central European countries, now members of the EU, have an even longer history of institutionalized academic paralysis.

One of the most effective instruments that Germany has created to re-inject the competitive spirit is the Excellence Initiative, which throws a few million euros and considerable prestige at a handful of universities judged in a high-profile competition to be strongest in research. All universities have been energized in the process. The ERC, if it works as planned, should provide such a stimulus across Europe, and ever more so as its experience and budget grow.

When the German chancellor Angela Merkel opens the ERC launch next Tuesday, she will at the same time be launching a new phase in European research — but only for those universities that are up to the task.