This study focuses on the state and effectiveness of national funding systems of Higher Education to support the European Universities Initiative. Its focus lies on the mechanisms employed by Member States for the core funding of higher education institutions, in particular the mechanisms that include performance elements. More specifically, the study reviews the rationale of Member States' Performance Based Funding (PBF) systems and the evidence on their impact on various dimensions of higher education performance. The types of funding mechanisms and their degree of performance orientation are compared across Member States, and contextualised information on positive and negative effects of Performance Based Funding over the period 2010-2020 is collected and analysed. In addition, information is collected on the type and extent of the Members States' financial contributions to the transnational university alliances funded as part of the European Universities Initiative. The study provides a set of conclusions on effectively implementing national and EU policy priorities through PBF in higher education. From the qualitative and quantitative evidence generated from this study, a series of recommendations related to various aspects of national higher education funding mechanisms are put forward for Member States to consider, including on the suitability of PBF systems to support transnational university alliances under the European Universities Initiative.