The Unicef report, unveiled in Bonn by the organisation's goodwill ambassador, Sir Peter Ustinov, is the first comprehensive study of education in the region since the fall of communism.
"The quality of schooling has fallen," it concludes. "Huge reductions have taken place in many countries in real public expenditure in education - by almost three-quarters, for example, in Bulgaria."
Wars and ravaged economies have put intolerable strain on education budgets. In Georgia, textbooks can cost the equivalent of several months' wages. Teacher's salaries, traditionally low in comparison to other professions, have declined further, and in some countries are paid several months late.
Full literacy was one of the few real achievements of communism, but recent years have seen the emergence of school-leavers who cannot read or write. The problem is most acute in the former Soviet Union, but even in Central Europe, whose pupils still outscore England in maths and science, a growing proportion of children fail to acquire basic educational skills.
The widening gap between rich and poor threatens to push the less fortunate to the margins. There is an explosion in the number of private schools, which bleed the state sector dry of teaching talent.
Although Unicef recommends teaching reforms, it concedes that the biggest problem is lack of funds. After the longest period of depression this century, the region's economies are beginning to turn the corner. But for those who are just being disgorged onto the jobs market after nine miserable years in the classroom, help will be too late.