A report on higher education in Wales has called for three universities in south Wales to join together in a single institution.
Universities in Wales face increasing competition, the report says
It suggests the University of Wales Newport, the University of Wales Institute in Cardiff (Uwic) and the University of Glamorgan should merge.
The report was compiled by the Higher Education Funding Council for Wales (HEFCW) which oversees funding.
In 2003, an attempt to merge Uwic with the Glamorgan institution was aborted.
First Minister Rhodri Morgan has welcomed the report, and said the universities should plan their future together to play a major part in the development of both Wales' higher education and economy.
The Higher Education Funding Council for Wales has pointed to the real financial problems facing every university in Wales.
It suggests that Uwic and the Newport institutions would best avoid a "spiral of decline" by joining together, with "close collaboration between themselves and Glamorgan".
Their report also warns that, if the three institutions do not work together, there is a real danger of decline in the face of competition from England and between the three themselves.
In 2003, Uwic's board of governors pulled out of merger negotiations with the University of Glamorgan in Pontypridd, saying the merger would not be in the "best interests of Uwic and its students".
The deal would have created the biggest university in Wales, with more than 30,000 students, and one of the largest in the UK.
Professor Roger Williams, chairman of HEFCW, said: "This is an important report for the future of higher education in Wales.
"It offers a bold vision for delivery across the geographical area covered by the existing institutions, to the benefit of all their students and of south east Wales as a whole.
"The council will take its conclusions carefully into account, and will be entering into early discussions with the leaders of the three institutions."
A spokesperson for Uwic said: "Uwic has received a copy of the report and will now consider, in detail, its response following extensive consultation with the governing body and the staff of the institution."
University of Glamorgan Vice Chancellor, Professor David Halton, said it disagreed with the proposed merger.
"We simply see no merit in conducting another merger process which the authors contend may take five years or more to deliver," he said.
However, he said the University of Glamorgan would be prepared to consider taking over UWC Newport and Uwic.