The programme, begun as a study abroad initiative in the 1980s, has branched out into student traineeship placements and job-swaps for academic staff, with some 300,000 exchanges taking place across Europe in the 2011-2012 academic year.
Named after the 15th century Dutch theologian Desiderius Erasmus, the programme is often cited as one of the EU´s most successful initiatives, doing more for common European understanding than any number of grand schemes.
To try to build on its remarkable success and counter record-high levels of youth unemployment in several EU member states, the programme´s budget will rise by 40 percent to 14.5 billion euros in the EU´s 2014-2020 budget.
At the same time, several other initiatives, including a volunteer programme and youth and sports projects, will be folded into it and the name will be changed to "Erasmus+".
The amount of the budget dedicated to education and training will be raised to 5 billion euros from 3.1 billion euros.
"Erasmus is more important than ever in times of economic hardship and high youth unemployment," Androulla Vassiliou, the European commissioner for education, culture and youth, said on Monday as she set out the latest plans for the programme.
"The skills and international experience gained by Erasmus students make them more employable and more likely to be mobile on the labour market."
Youth unemployment has become a particular scourge in Europe during the past three years of economic crisis, with more than 50 percent of young jobseekers out of work in countries such as Greece, Spain and parts of Italy and Portugal.
EU leaders have set aside 8 billion euros to tackle the problem, including offering a "youth guarantee" that involves a job or training within four months of leaving full-time education or being made unemployed.
By increasing funding for Erasmus, more young people might decide to stay in education so as to study abroad, while also raising their chances of future employment if they learn a new language and other skills while on the programme.
Under Erasmus, students can study almost anywhere for up to a year, while paying the same fees as they would do at home. It has allowed Italians to study in Finland, Lithuanians to go to university in Portugal and Irish students to head to Greece.
Under the plans unveiled by Vassiliou on Monday, the number of traineeship placements will be expanded to make young Europeans more competitive on the labour market.
Funds have also been set aside to provide loans to students wanting to complete full master´s degrees abroad, since these are increasingly attractive to employers. Placements will also for the first time expand beyond Europe´s borders.
Since Erasmus began sending students abroad in 1987, it has helped over 3 million young Europeans to study or train in another European country. Currently about 10 percent of EU university students go abroad during the course of their studies – a number the EU wants to double by 2020.
Emanuel Alfranseder, a German who heads the Erasmus Student Network, which promotes social integration of international students, studied in Vilnius, Lithuania in 2007-2008.
"Erasmus changed my life a lot," said Alfranseder, who now lives in Brussels. "After the programme I basically stayed abroad and never went back."
Source: REUTERS (Reporting By Anders Melin; editing by Luke Baker)