As highlighted in the results of the Eurocities Pulse Mayors Survey 2023, the economic recovery represented both one of the top three challenges for mayors in 2022, and a top three priority for 2023 – with climate action being the top priority overall. When city governments have the opportunity to leverage funds to further Europe’s transition towards climate neutrality while promoting social cohesion and justice, they move in a bold and effective manner. Cities are not only the place where most people live, but also the site where most impact can be made with the right investments.

However, research shows that there is an enormous gap between the funds at cities’ disposal and the investments required to meet local and European goals for inclusive sustainability. The European Investment Bank found that 70% of cities lacked the resources for necessary investments in social, digital and climate infrastructure. This is further supported by the results of the Eurocities Pulse Mayors Survey, which shows that while these three areas are among the top four areas, along with sustainable mobility (second), in which mayors believe EU funding can make the biggest impact, they are also areas where mayors do not anticipate having enough resources in the next five years – with roughly one third of all respondents saying this is the case for climate change and energy transition, and for fighting urban poverty and social exclusion.

In fact, the level of long-term investment available to cities has been decreasing for more than a decade, a trajectory that continued in 2022. Local governments are enthusiastic to turn the tide, and have outlined several proposals for European policy makers that could successfully enable economically and environmentally sustainable investment.

As Ben Rogers points out in his guest essay for this publication, cities predate national governments by hundreds, sometimes thousands of years. This could be the reason that cities tend to be better at taking a long-term view, and consistently advocate for investing in our shared future. Despite many great initiatives conceived and put in place, long-term investment in sustainable and social infrastructure is often blocked by lack of access to finance. Eurocities has thus argued for more flexible spending rules and better access to funds, highlighting documented investment gaps that stand between Europe and its Green Deal goals.

Eurocities has recommended that more money from Europe should go directly to local projects on sustainable development and social and economic transition. They suggest that finding more direct routes to fund cities is the best way to ensure that European funds effectively solve the issues for which they were intended.

This can be done by combining existing funds and redirecting unused money from the EU’s post-covid recovery funding. The EU Mission for 100 Climate Neutral and Smart Cities by 2030, launched in 2022, could serve as a model for more direct and expansive collaboration between cities and the European Commission.

Cities also need more help from Europe to encourage private investors to back things like green energy, digital technology, and social infrastructure projects. This can be done through tools like bonds, mutual investment programmes, and investment platforms. Cities often flex their funding muscles by making small initial investments in underfunded fields to attract private finance, or by guaranteeing bank loans for sustainable projects. However, to continue serving this important role, they also need more financial flexibility.

The European rules around debt and macroeconomic governance, such as the Stability and Growth Pact, should therefore be changed so that local communities have more fiscal leeway to make long term investments that help with environmental and social changes.

The European Commission’s proposed redesign of the pact includes a mechanism for member states to obtain more financial flexibility if they complete national investment plans, along the same model as was required for the EU’s Recovery and Resilience Funds after the pandemic.

As the place where these plans will be implemented, cities are demanding a greater involvement in the plans’ development. At a minimum, the EU should ensure that national plans are in line with the core European goals of the just and green transition, which cities are already working hard to realise, despite some national-level divergence.

Cities play a crucial role in innovation. However, the New European Innovation Agenda does not acknowledge the breadth of this role. The agenda has five flagships: funding for scale ups; enabling innovation; accelerating and strengthening innovation; fostering, attracting and retaining talent; and improving policy making. The role of cities is only acknowledged in that final flagship, but their involvement in all these areas is great.

For example, testbeds, small areas where innovations are designed and implemented with a view to a potential broader application, are frequently employed by cities to foster innovation. For testbeds, cities design the legislative or regulatory framework that allows them to flower, but they also deliver practical support. They establish connections between companies, academia, civil society and other actors, and they also often provide funding for the early stages of innovation. This funding is essential for small businesses to try out new solutions in the wild.

In Aix Marseille Provence Metropolitan Area, for example, the city has its own accelerator which it uses to help entrepreneurs develop business plans and understand the local market and regulatory environment. The city also puts entrepreneurs and small businesses in touch with potential investors and clients, and helps to fund their initial endeavours.

At the same time, Aix Marseille links this activity with the research of the local university, and facilitates exchange between the many other accelerators, incubators and public and private bodies engaged in fostering innovation.

Cities also get involved in developing new skills, putting populations and businesses in contact with each other to reskill and upskill to meet market needs, and attract foreign talent. In Helsinki, the city is anticipating future needs of the architecture and construction industries by helping educators design curriculums that include innovative sustainable materials and building practices. Utrecht is working hard on attracting and retaining talent by implementing a programme to find meaningful employment for their spouses, who are themselves often skilled professionals.

As active enablers of innovation through funding, connecting players, helping with skills development, and innovating directly themselves, cities do much more than just set generic policy frameworks in which innovation happens. They are also vital in guiding the forces of innovation towards pressing issues like climate change, sustainability, and creating just and inclusive societies. The New European Innovation Agenda must acknowledge this.

The EU made historic levels of funding available for the post-covid recovery. Recognising the essential role of local governments in recovery, the Commission mandated that cities should be consulted in the creation of the National Recovery and Resilience Plans. Unfortunately, despite some impressive cooperation, for example between the Italian national government and its cities, over 63% of cities surveyed by Eurocities evaluated the process put in place by their government to consult cities as insufficient, with only 5% evaluating it as ‘good.’

According to results collected by Eurocities, in their submissions last year to the national recovery plans, 79% of cities proposed projects on public transport services, 53% included projects on renovation, and 47% wanted to go forward with the digitalisation of education and public services.

In Florence, for example, initial funding was quickly channelled into creating four new schools, built with sustainability in mind. The schools will incorporate design ideas such as natural lighting and better ventilation, rainwater recovery and a green system to protect against smog, high temperatures and noise.

The early lockdowns gave a strong impetus to further develop ideas such as the ‘15-minute city,’ which is being championed by the likes of Paris. Milan, for example, has mapped access to essential services, especially healthcare, and is taking steps to ensure that citizens can access this within a 15-minute walk of their place of residence.

Amsterdam is focussing on the ‘doughnut model’ for its post-Covid recovery. This idea, developed by economist Kate Raworth, holds that the principle of economic activity is to meet the core needs of all people, while staying within the environmental boundaries of the planet. This especially concerns resource use, and, Amsterdam, already a champion of the circular economy, aims to become fully circular by 2050.

Overall, the Recovery and Resilience Plans were a missed opportunity to engage cities, and therefore to advance collaborative efforts towards the twin digital and sustainable just transitions. Nonetheless, the new national investment plans proposed as part of the redesigned Stability and Growth Pact may be an opportunity to learn from previous mistakes.