How do European professors and universities avoid grade inflation? Are their incentives very different?
In general university costs money, both to the Government/State and the student, and thus incentives are somewhat aligned for both parties. Also, student loans are NOT a common thing here... When I was at uni, the cost of the studies was about 1000€/year (500€ for me as my parents have 3 children), now it's about 2 to 3k€/year, but it's still something somewhat feasible. That's Spain, in Germany for example it's free.
There's no way you can generalise about incentive structures like that for an entire continent.
In my country, only public universities exist and the incentive structure is decided politically. Currently, universities get paid a certain amount for each student that graduates, but they are also deducted some set amount if the student doesn't graduate within a specific amount of time. In addition to that, the sum of money gained from a single STEM student is double that of another kind of student, so the universities have quite clear incentives to promote their STEM degrees.
Obviously, an incentive structure based solely on passing students must also inspire grade inflation. The current structure highly incentivises making STEM degrees easy to obtain. Whether that's actually the case, I can't say, but the structure certainly encourages it.
On top of that, there are no limits on how many times you can retake a class, it is not unusual to be stuck with the same class for three or four years until you manage to pass.
The university departments get different amount of money depending on the amount of students they have, but this money cannot be spent freely (e.g. on increasing professor's salaries), but must be spent for education-related things like hiring more TAs, which is something that departments that get more students need to do anyways.
The professor salary is pretty much standardized (per the TVL), which does allows for sur-pluses in case that the responsibilities justify them, but university "students" do not play a role here. Things that affect these are, for example, having larger management-related responsibilities. For example, a professor with 4 PhD students and 2 postdocs gets less money than a professor with 30 PhD students, large experimental facilities, 10 mechanics, 5 middle management personell, ... adding up to 60 people under supervision.
So while I agree that the universities do have an incentive to grow the number of students in STEM degrees, the professors do not really have a big incentive to make the degrees easier.
The professors that "get rich" in Germany have large consulting companies on the side to which they try to attract the top talent, so if anything, the incentive is to produce more top talent. This can incentive them both ways, making things easier to attract more students to get more students in their companies, or making things harder to filter out the bulk from the top talent. But that's just supply and demand.
Entire departments are built on this principle.
That's sadly not true in all of Europe. I attend university in the Netherlands, and since government allowances were replaced by loans a few years back, having a student loan has become the norm for students.
American universities run on government and private finance. If they don’t graduate a certain percentage of students that financing gets withdrawn. So it’s easy to see where giving better grades leads to higher graduations connected to government financing.
I wouldn’t necessarily call it better. I have friends who have taken 8+ years to get their Bac+3. The lower tier universities have capacity issues. The class you need may be full and can take years to enroll. Also, with no motivation to pass students you are truly in your own. Things like office hours, tutors, study labs, and the library not being open late like we have in the US. These are surprisingly uncommon in France.
A more political reason is because University prestige depends partly on the knowledge of the graduading students. So if someone said they studied in X and they had no idea what they were talking about it'd give quite a bad image for the university. It's not rare to see some students crying at the exam review but it mostly doesn't work.
The main difference between grades in Spanish engineering schools and the rest of Europe seems to be that the grade curve is heavily compressed between 4/10 and 6/10 (passing grade is 5/10). The amount of study needed to reach a passing grade would amount to an A elsewhere. As long as 25% (IIRC) of the students pass there are no consequences for the department. If less people pass, they just award a 5.0 to everyone from a certain grade up, they don't do curves. It is not unusual for people to retake a class for three or four years in a row.
There is not much guidance from professors either, no homework or extra assignments. There is just one or two midterms and a final exam, and if you're lucky there will be official course materials to study from but that is not a requirement. Most exchange students have a pretty bad time here, but on the other hand Spanish students abroad usually ace their exams with half of the work they are used to.
I’m glad my university had more focus on labs and hands on work. I pretty much aced all my labs and did okay on paper exams. Paper exams always felt like an exercise for the professor to put students on an explicit bell curve.
EE->IE->IM->I'm Out.
Electrical Engineering, Industrial Engineering, Industrial Management, transfer.
There is also heightened student pressure for similar reasons. but it is not just students.
I will say however that universities in my country are heavily recruiting foreign students to the point that everything is in English.