Graeme Hyslop, principal of Langside College, who chairs the West of Scotland Colleges European Partnership, suggests the crisis "has the potential to destabilise the sector" if discussions on how to avoid it do not start now. Mr Hyslop said there had to be communal action, rather than it being left up to individual colleges.
One estimate suggests that support for EU-funded programmes in FE could be slashed by between 50 per cent and 70 per cent.
The Scottish Further Education Funding Council signalled the seriousness of the issue by setting up a working group, which includes representatives from the colleges. "The aim is to establish a baseline position across all colleges with a view to helping them manage the reduction in European funding," a spokesperson told The TES Scotland.
The figures show the considerable impact European funding, which covers training and structural support, has made in the FE sector. In Scotland as a whole, the most recent official data show that only 3.4 per cent of total college income came from European sources in 2003-04, up from 3 per cent in the previous two years.
But the actual sums are not inconsiderable - rising from pound;14.5 million in 2001-02 to pound;18 million in 2003-04. And the 3 per cent proportion of income is simply the average: the range two years ago was from zero in some colleges to 13 per cent in the case of North Highland College in Thurso.
Over the four years to June 2004, cumulative funding from the European Social Fund (ESF) and the European Regional Development Fund (ERDF) amounted to Pounds 117.5 million.
A report on financial indicators by the funding council last year said that only 26 of the 46 colleges had maintained or reduced their dependency on European funds.
Figures for the 20 colleges originally in the west of Scotland partnership (reduced in later years to 18) outline even more dramatically how significant a source of funding European programmes have become. The decade from 1994 to date has seen pound;143 million pour into college coffers in the former Strathclyde Region.
Social fund cash has allowed colleges to mount courses for the unemployed, develop employability skills, offer training to small businesses and work with social inclusion partnerships.
In the west of Scotland, regional development support has helped provide a new campus for John Wheatley College in Glasgow's Easterhouse, the Kilwinning outpost of James Watt College, an arts centre "fame academy" at Ayr College, a new technology and business centre at Cardonald College, a business learning zone at Central College of Commerce, business and integrated learning centres at Langside College, and a learning centre in Kirkintilloch by Cumbernauld College.
Further funding from the regional development fund in particular will be crucial if the Scottish Executive is to complete its ambitious programme of capital investment. West of Scotland colleges alone expect up to pound;23 million within the next year.
An Executive spokesman said that the issue of EU funding was a reserved matter for Westminster and officials were working closely with their counterparts in London. "Negotiations are still ongoing in Brussels and, at this stage, it is extremely difficult to predict what the outcome may be.
The aim is to secure the best deal for Scotland, no matter what the source of the funding."
The problem has arisen because the EU is revising not only the structural funds it provides to boost employment and training but also its overall budget. This review has been partly prompted by the need to transfer resources to the new Community states, largely in eastern Europe, and to other countries which are below the average GDP for the EU.
Insiders suggest that the emphasis in funding will switch from "social" activities to promote cohesion and inclusion in disadvantaged communities, which would be a particular blow for colleges serving deprived areas, to economic priorities such as competitiveness and employability.
Mr Hyslop comments: "Whatever happens, there will be scaled-down support.
There will be less funding to bid for and the bidding will be more competitive."
Mr Hyslop believes some colleges are better prepared than others to meet the challenge. "Some colleges run discrete EU-funded programmes which would simply cease. Others augment what they are already doing to make their standard programmes better, which is a more complex position."
The West of Scotland Colleges' Partnership is planning a "festival of further education" in June to celebrate the achievements of colleges in their use of European support funds. It says colleges "have vindicated their credentials as significant players in the field of economic regeneration through their continuing efforts to supply and maintain the skills levels required by the labour market".