
2.2. Diagnosis: economic 
development and 
competitiveness under threat 
Europe is no longer in a situation of continuous economic 
and demographic growth. The decline or disappearance of 
traditional manufacturing industries has led to the loss of 
skilled manufacturing jobs and a mismatch between labour 
market supply and demand. With increasing immigration 
and mobility, pressures on national welfare systems and 
more vulnerable labour markets, European cities face 

increasing social and economic polarisation, both within 
and between them. The recent financial and economic crisis 
– whose negative effects have yet to completely unfold – 
has left many European cities in a poor state, accelerating 
the polarisation process and putting the European urban 
development model to the test. 

2.2.1. Europeancitiesfollowverydifferent 
developmenttrajectories 
The economic development of a city is highly pathdependent 
and is affected very much by its previous history 
of economic specialisation and institutional development. 
Each European city follows its own individual development 
trajectory. These trajectories can be more or less sensitive 
to external influences and shocks – depending on cities’ 
resilience and resistance to external events – and are also 
altered by public policy interventions. 

The diversity of European cities in terms of size, 
demographic mix, as well as economic, social and 
cultural heritage, gives them very different possibilities 
for changing their development trajectory. However, 
as competition increases, cities have tried to improve 
their respective position by developing and attracting 
economic activities by establishing strategic visions, 
endeavouring to involve key economic players, improving 
the quality of life for professionals, and developing centres 
of creativity, etc. 

51 
According to an expert commission set up in December 2008 by the German Association for Housing, Urban and Spatial Development – 
supported by the Federal Ministry of Transport, Building and Urban Development. 

52 
ESPON FOCI Final Scientific Report, Chapter 2, op.cit. 


Cities of tomorrow -Challenges, visions, ways forward 

Nevertheless, many studies have shown that the economic 
growth of cities is frequently embedded in national 
economic systems and is often strongly related to the 
development of the latter. Seventy-four per cent of the 
differences in growth (in GDP) between individual cities in 
Europe is accounted for by differences between the growth 
rates of different countries, and just twenty-six per cent by 
the differences between growth rates of cities in the same 
country.53 There is, however, a marked difference between 
large cities’ growth in EU-12 and EU-15. The largest cities 
in EU-15 Member States grew marginally faster than cities 
as a whole within their countries in the period 1995-2001 
and grew at about the same rate in the 2001-06 period. 
However, the largest cities in the EU-12 Member States grew 
significantly faster in both periods.54 

2.2.2. Askill base under threat 
The evolution of the vast majority of European cities’ skill 
bases has been dependent on the changing organisation 
of industrial production and the increasing service content 
of both inputs and outputs, ranging from research and 
development to maintenance, much of which relies on a 
qualified workforce. The loss of manufacturing jobs has not 
only reduced the demand for low-skilled labour, but also 
affected demand for high-skilled jobs. 

A considerable portion of the high-level services that cities 
have tried to develop in recent decades has been related 
to the financial sector, including the legal and accounting 
services that feed into it. The financial sector has been 
considered a key part of the knowledge economy, but 
its utility for economies as a whole has been increasingly 
called into question by the financial and economic crisis. 

The loss of manufacturing jobs is difficult to compensate 
with the creation of new, more highly skilled and 
competitive jobs. The transition to a more qualified labour 
force is difficult, as the low-skilled unemployed, especially 

the long-term unemployed, face serious difficulties in 
upgrading their skills and reintegrating into the labour 
market. Moreover, the present growth model, with its 
decoupling of economic growth from employment, has led 
to a larger share of the population being either pushed out 
of the labour market or having to accept low-wage jobs in 
the non-qualified service sectors. For instance, the evolution 
of jobs in Belgium between 1991 and 2001 shows a net gain 
of skilled jobs of around nearly 60 000, but these new jobs 
are outweighed by the massive loss of 230 000 manual 
jobs. Cities like Liege and Charleroi have experienced net 
losses in both categories of jobs, although the proportion 
of skilled jobs has increased.55 

The public sector in many European countries is reducing 
budgets through direct layoffs and increased reliance on 
the private sector. In some cities with a high proportion of 
public sector jobs, this may cause serious problems if there 
is no private sector demand. 

53 
ESPON–FOCI, final report, p. 44; GDP is measured in purchasing power standard. 

54 
ESPON–FOCI final report, pp. 44–5. 

55 
Van Hamme, Gilles, Wertz, Isaline and Biot, Valérie, ‘Economic growth devoid of social progress: the situation 
in Brussels’ in Brussels Studies (www.brusselsstudies.be) issue 48, 28 March 2011. Based on 1991 population census; 
2001 Socioeconomic Survey; INS (National Statistical Institute). 


GLIWICE – Using regional funds to support local SMEs and economic 


revitalisation of the city 


With 192000 inhabitants, Gliwice is the second largest city 
in the Upper Silesian industrial region, one of the main 
industrial zones of Poland. Following the initial difficult 
years of political and institutional restructuring following 
transition towards market economy, Gliwice managed 
to turn things around and today is in a strong position. 

It has managed to attract large companies to the area, 
including Opel, NGK Ceramics, Mecalux and Roca. 
However, support is also vital for SMEs, representing 99% 
of enterprises in Gliwice, and knowledge-based activities, 
notably the Technical University and research centres. 
The municipality, its agencies (Local Development 
Agency, NGO centre), the Silesian Association of Support 
for Enterprises and other bodies (Technology Park, 

Chamber of Commerce, etc.) are working together 
to ensure this support continues. Their activities 
focus on training and advisory programmes for target 
groups (unemployed, NGOs, young people, etc.) and 
also physical investment projects (abandoned mine 
reconstruction, Technology Park construction, etc.). 

As an example of a city that relies heavily on EU funds, 
Gliwice illustrates the various sides of this funding. 
The general aim of the city – to address the priorities 
and demands established by the EU – tends to favour 
standardised projects rather than tailored projects 
based on local assessments. Thus, close coordination 
in areas such as programme monitoring and impact 
analysis is needed at city level. 



Cities of tomorrow -Challenges, visions, ways forward 

2.2.3. Cities facing the crisis 
The volatility of international business – as harshly experienced 
by many cities during the crisis – makes cities that strongly 
rely on foreign direct investment vulnerable to changes in 
international competition. The same goes for cities dependant 
on single sectors, especially traditional manufacturing or rawmaterial-
based industries. Among the most vulnerable are 
those cities dependent on a mono-sector manufacturing base 
in decline. They are challenged by a need to restructure and 
diversify their economic base while facing out-migration and 
a loss of financial capacity. Delocalisation of manufacturing has 
led to a loss of skilled jobs and the destruction of human capital 

– a negative spiral trajectory. Outsourcing of the manufacturing 
of specific components has had similar negative consequences, 
with a loss of tacit production knowledge and the replacement 
of skilled production work by low-skilled assembly work.56 
Many cities, especially in Central and Eastern European 
countries, including the former East Germany, started 
experiencing delocalisation and shrinking populations 
in the mid-1990s. Increasing pressure on European cities 
brought by globalisation and European integration 
in the past two decades has led to a polarisation of 
urban performance, which has been aggravated by the 
enlargement process. Central and Eastern European 
cities have faced the additional challenge of increased 
competition while radically transforming their economies 
and their economies’ institutional foundations. 
This adjustment process is proving extremely difficult, 
especially for cities not benefitting from foreign direct 
investments. The ensuing significant decrease of public 
finance has led to emergency situations in many of these 
cities, with decaying infrastructure, high unemployment, 
deserted inner areas and growing segregation. 

Figure1 Job losses in cities due to the economic crisis 

Main sectors aected by unemployment increase 

Sectors 

ICT 
Logistics/port activities 
Real estate 
Financial services 
Other Services 
Transport 
Public administration 
Tourism 
Automotive industry 
Retailing (including electronic retailing) 
Construction 
Manufacturing/Industry 


0 5 10 15 20 25 30 35 40 45 

Number of cities 

Source: Cities and the economic crisis – A survey on the impact of the economic crisis and the responses of URBACT II cities, April 2010 

56 Calafati, Antonio, Workshop 1 Cities of tomorrow – Urban challenges, Brussels, June 2010. 

21 



The negative effects of the recent financial and economic 
crisis, in particular the fiscal crisis, with reduced public 
budgets and austerity policies combined with the rising 
need for social expenditure, have brought an additional 
number of cities (especially in Southern Europe) closer 
to a similar situation. It may be that we have not yet seen 
the worst of the crisis in many of those cities, as many 
cities’ economies rely heavily on the manufacturing 
sector, which has been one of the worst hit by the crisis 
(see Fig. 1 on previous page).57 

2.2.4. Competitionasazero-sum game 
Links between cities in Europe are considerably more 
extensive than those on other continents.58 Over the past 
few decades, cities in Europe have generally developed 
together and when they have fallen into crisis, they have 
done so briefly. In the future, due to increasing competition, 
it appears likely that there will be not only winners, but a 
considerable number of losers who will fall into a more 
fundamental crisis due to the cumulative causation 
involved. 

Competition between cities in attracting firms or highly 
skilled individuals can also be a zero-or negative-sum 
game, in which cities compete for finite human and 
monetary resources within the European space by 
undercutting each other. A low-tax strategy may not only 
reduce capacities to improve infrastructure, develop high-
quality public services and improve living conditions for the 
city itself, but also undermine nearby cities’ fiscal policies. 
Overly expansive policies aimed at attracting investments 
or human resources may only be partly successful because 
of nearby competition, and fail to generate enough 
outcomes to be sustainable over a longer period. 

2.3. Diagnosis: a growing 
social polarisation 
European cities have traditionally been characterised by 
less segregation and less social and spatial polarisation 
compared to, for instance, US cities. This has been especially 
true for cities in countries with strong welfare systems. 
However, there are many signs that polarisation and 
segregation are increasing. The economic crisis has further 
amplified the effects of globalisation and the gradual 
retreat of the welfare state in most European countries. 

Although average living standards have increased over 
time, there are signs not only of growing income disparities 
but also of the poor getting poorer. In some places, local 
populations suffer from a concentration of inequalities: 
poor housing, low-quality education, unemployment, and 
difficulties or inabilities to access some services (health, 
transport, ICT). Reduced public finances in many cities have 
led to restricted cyclical policies which aggravate these 
issues further. With fewer labour market opportunities, 
there is a risk of increasing intolerance and polarisation 
between those who contribute and those who benefit from 
social allocations. 

The situation is very varied in Europe, and some cities 
have been worse hit than others, not least the Central and 
Eastern European countries, in which political restructuring 
has led to new patterns of social and spatial segregation. 
The wealthier cities of Western Europe also face the 
challenge of rising segregation and polarisation. Based on 
data from the EU Survey on Income and Living Conditions 
(EU-SILC), it has been shown that there is a higher share 
of severely materially-deprived individuals in the urban 
population compared to the rest of the population in the 
EU-15 Member States (see Annex 1 – Chapter 2). In Belgium 
for instance, there is increased income inequality in cities 
and those with the lowest incomes are actually getting 
poorer.59 

57 Calafati, Antonio, issue paper, Cities of tomorrow, Brussels, December 2010. 
58 ESPON–FOCI, final report. 
59 Source: IGEAT, Growth and Social Exclusion project for the Belgian Federal scientific policy, draft final report; cities are approximated by NUTS 3. 



Cities of tomorrow -Challenges, visions, ways forward 

AMSTERDAM – Rethinking diversity policy to strengthen social cohesion 


and tackle the risk of segregation 


Like most large European cities, Amsterdam is facing 
a social cohesion challenge. While other cities focus on 
the integration of migrants, Amsterdam is more open, 
dealing with all minorities equally, including migrants 
and other underprivileged or discriminated groups. 

Amsterdam has seen two migration flows in recent 
times: from former colonies, mainly Suriname, Antillean 
islands like Aruba, Curaçao, St Martin and the Moluccas, 
and from other countries; both driven by economic 
deprivation and/or political repression. 

National policies on ethnic minorities are seen as 
generally tolerant, Amsterdam being a flagship for these 
policies. But city authorities have now shifted from a 
‘minority policy’ to ‘citizenship policy’ approach focused 

on dealing with individuals. One consequence is that 
people acting more independently of their ethnic group 
may weaken internal group cohesion. 

To address this and also the challenge of growing racism 
and xenophobia, the city authorities are promoting the 
participation of and cooperation with all inhabitants 
and taking action to de-legitimise and oppose racism 
and discrimination. The city of Amsterdam, more than 
any other Dutch city, has undertaken positive action in 
support of ethnic minorities, including immigrants from 
non-western countries and refugees. The action has 
included mechanisms aimed at recruiting non-Dutch 
people or Dutch people with foreign roots to work in 
public services (currently 22% of staff; with a new target 
of 27%). 


In this photo collage Fatima Elatik, the local councillor takes the floor. She is shown surrounded by the women, the 'regentesses', 
who controlled the municipal government in the XVIIth century. This is a reference to the spirit of Amsterdam's golden age, 
which is still very much alive in the city. Fatima Elatik is of Moroccan origin and highly active in the field of diversity policy. 


Polarisation is a question not only of rich and poor, but also 
of cultural, social and ethnic diversity. Globalisation has 
led to an accelerated circulation of people, commodities, 
capital, identities and images, as well as an increased 
mobility of ideologies, economic principles, policies and 
lifestyles. The widespread use of social ICT applications, 

e.g. Facebook, has given new meanings to space and place. 
There has been a shift from a class-based modern society 
to a fragmented postmodern urban society with many 
different groups living side by side, sometimes without 
interaction. 
The very concept of social cohesion is being put to the test 
by these developments. Simultaneously, there can be very 
strong cohesion within particular groups or communities 
in an urban setting, but intolerance and even violence 
between them. Such cohesion is constrictive, oppressive 
and exclusive, and it inhibits social mobility. Social cohesion 
must, therefore, be considered at different scales and 
territorial levels, and its possible negative elements must be 
understood and countered. It needs to be built on universal 
values, such as sharing public places and services, rather 
than historical values linked to national, religious or ethnic 
identities. 

In some situations, the poorest parts of the population 
have been left behind or been put at risk of lagging 
because of policies designed to increase the attractiveness 
of cities which focus on upgrading city centres, building 
new eco-neighbourhoods, business parks or shopping 
centres, thus increasing social and spatial segregation. 
One example is energy poverty; with rising energy prices, 
those most in need of energy efficiency investments are 
those that cannot afford them or cannot benefit from 
tax incentives. Accessibility to services, including public 
transport, as well as culture, also tend to be less developed 
in the least attractive parts of urban areas, aggravating 
the exclusion and isolation of the poorest. The increasing 
reliance on private initiatives and charitable organisations 
to alleviate poverty-related problems raises questions about 

transparency and democracy, as many of the organisations 
involved are faith-based or have their own political agenda. 

2.3.1. Spatial segregation and housing 
Good housing conditions are key to making a city and its 
agglomeration attractive and liveable. However, in many 
cities, spatial segregation processes – as an effect of social 
polarisation – make it increasingly difficult for people with 
low incomes or from marginalised groups to find decent 
housing at affordable prices. 

In Romania for example, more than 900 000 people have 
between 3 and 3.5 square metres – the equivalent of 
one bed and half a table – to live on.60 Social integration 
strategies based on education and training may work 
in situations of relative poverty but do not function in 
such situations of extreme poverty and segregation: 
‘it is impossible to learn mathematics in a nice school and 
go back to the shack, sharing the only bed with four other 
brothers’.61 

Socio-economic and demographic trends have an impact 
on spatial settlement structures, which will exacerbate 
social polarisation, reinforcing links between specific 
socio-economic groups and specific housing conditions 
and locations. This is an issue not only for those living in 
precarious conditions but also for those facing either a 
decrease in their revenues or a strong increase in market 
prices for housing. They may include, for example, people 
who have lost their jobs, single parents, retired people, 
as well as an increasing number of young people due to 
the impact of the economic crisis on the job market. 

The gentrification of city centres and the rising cost of 
housing make it increasingly difficult for a number of 
people to find decent or affordable housing where they 
grew up. In France, the share of housing costs in household 
budgets has grown from 10% in 1960 to 30% in 2010, 

60 
Data drawn from the 2002 Census in Berescu, Catalin & Celac, Mariana, Housing and Extreme Poverty. The Roma Communities Case, 
UAUIM, Bucharest, 2006. 

61 
Berescu, Catalin, Workshop 1 Cities of tomorrow – Urban challenges, Brussels, June 2010. 


Cities of tomorrow -Challenges, visions, ways forward 

Socio-demographic evolutions in the Czech 
Republic between 1990 and 201062 

The spatial imprint of social polarisation follows partly 
the spatial pattern of Western European city regions 
but with some specific features. The housing estates 
which accommodate a remarkably large percentage of 
the national population – 30% in the Czech Republic 

– have changed from mostly middle-class young 
family housing in the 1960s to 1980s, into residences 
for elderly people and, increasingly, for migrants and 
centralposhenclaves 


gatedsuburbanenclaves 
suburbansatellites 


compactcity&gardensuburbs 


housing estates 
dilapidatedexclusionenclaves 

Yellow field = migrants ; grey field = elderly 
Source: Maier, Karel, op. cit. 

other transitory populations. Exclusion enclaves have 
emerged, especially in old working-class districts and 
housing estates in declining old industrial regions. 
At the same time, gentrification is changing certain 
attractive historical cores as well as certain selected 
inner-city districts. 

The wealthy settle in upmarket inner city areas and 
suburban locations while the poor – including a majority 
of migrants and elderly people – increasingly settle in 
housing estates and dilapidated exclusion enclaves. 


RICH 

IN-BETWEENS? 
MIDDLECLASS? 

POOR 

and represents as much as 37% for newcomers to the 
housing market.63 In the period 1994–2005, housing costs 
in the EU-15 increased from just under 25% of disposable 
income to just over 28% – a rise of almost 4 percentage 
points. The increase, however, was slightly larger for those 
in the bottom quintile of the income distribution – from just 
over 29% of income to almost 34%.64 

2.3.2. Anincreasing number of social dropouts 
The growing complexity of political decisions and the 
apparent increase in global private interests’ influence 
have led to a situation where politics seem to have become 
subordinate to economic interests. Consequently, ‘there is a 
growing perception that democratic elections seem to lose 
importance (no matter who will be elected policies will be 
approximately the same) pushing citizens into a more and 

62 Maier, Karel, Workshop 1 Cities of tomorrow – Urban challenges, Brussels, June 2010. 
63 ‘Le cout du logement’, Informations sociales No 155, CNAF, Paris, 2009. 
64 The Social Situation in the European Union 2009, Eurostat, 2010, 

http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KE-AG-10-001/EN/KE-AG-10-001-EN.PDF. 


more passive role’.65 Recent urban riots and mobilisation 
against local politicians’ decisions are signs that local 
residents are increasingly dissatisfied with this situation. 

There are also a growing number of people who do not feel 
as though they belong to the community in which they 
live. Cities will have to cope with a high number of social 
dropouts. One example of this trend is the sense of ‘no 
future’ shared by a large section of unemployed youths, and 
which may result in urban violence. Cities facing economic 
decline will have great difficulties facilitating socioeconomic 
insertion given the lack of jobs and reduced 
public budgets. A growing share of the unemployed is at 
risk of becoming marginalised, and there is a danger that 
the cities will see a ‘development of closed subcultures with 
fundamentally hostile attitudes to mainstream society, 
governed by different ideologies and social codes 
ranging from religious (or quasi-religious) to gangsterism 
(and overlaps between these)’.66 

2.4. Diagnosis – depletion 
of natural resources 
2.4.1. Urban sprawl and landconsumption 
Urban sprawl is a specific form of land take, resulting 
from the spread of low-density settlements, and is one 
of the main challenges that cities face.67 Urban sprawl 
concerns cities’ attractiveness, their resource efficiency, 
their transport infrastructure and the location of public 
and private services. What is more, it is very difficult to 
control, as the land being consumed by sprawl often lies 
outside the cities’ administrative areas. Weak planning 
regulation or its enforcement are commonplace in many 
European countries, leaving room for private interest to 
steer developments with a short-term profit logic in which 

common public goods are not valued. The European 
Environment Agency has expressed serious concerns about 
the development of urban sprawl in the EU, and land use 
has grown in importance as a European concern.68 

Several factors may explain the ongoing development of 
urban sprawl. Many people are settling in peri-urban areas 
because they can find better quality housing with more 
living surface per capita. There is still a large difference in 
the average living area per person between cities in the 
EU-15 and cities in the EU-12: 15 m2 per person is average 
in Romanian cities, compared to 36 m2 per person in Italian 
cities and 40 m2 in German cities.69 Out-migration from the 
city centre to the peri-urban areas may also result from a 
demand for a greener, more attractive and family-friendly 
environment. 

The development of urban sprawl is closely linked to spatial 
segregation. For example, the increased gentrification of 
urban centres drives people to look for more affordable 
housing further from the city centre, while the middle and 
upper classes stay in the core city, and vice versa, with wealthy 
social classes leaving poor and run-down city centres. Urban 
sprawl is also related to the more extreme cases of spatial 
segregation in the form of a growing number of gated 
communities within and outside cities. 

Privatisation in Central and Eastern European Member 
States has led to private housing estate companies building 
massively in peri-urban areas with few constraints on 
architectural quality, land use or possible master plans. 
These different factors may explain why urban sprawl is in 
progress around both growing and shrinking cities.70 Urban 
sprawl is also caused by non-coordinated commercial 
zoning of land in peri-urban areas due to fragmented 
local government and planning systems, with each local 
municipality trying to maximise its local revenues.71 

65 
Tosics, Iván, issue paper, Cities of tomorrow, Brussels, January 2011. 

66 
Hall, Sir Peter, contribution to Cities of tomorrow, Brussels, April 2010. 

67 
Cf. URBACT project LUMASEC (Land Use Management for Sustainable European Cities) 
http://urbact.eu/en/projects/metropolitan-governance/lumasec/homepage/ 

68 
The European Environment State and Outlook 2010 – Land Use (SOER 2010), European Environmental Agency, Copenhagen 2010 
[http://www.eea.europa.eu/soer/europe/land-use] 

69 
Urban Audit data 2001 and 2004. 

70 
Bauer, A., Röhl, D., Haase, D., and Schwarz, N., ‘Leipzig – between growth and shrinkage’ in Pauleit, S., Bell, S., and Aalbers, C., (eds), 
Peri-Urban Futures : Land Use and Sustainability, Springer, Berlin, 2011. 

71 
Tosics, I. (2011): Sustainable land use in peri-urban areas: government, planning and financial instruments: In: Pauleit, S., Bell, S., 
and Aalbers, C., (eds), Peri-Urban Futures: Land Use and Sustainability, Berlin: Springer. 


Cities of tomorrow -Challenges, visions, ways forward 

Urbansprawlhasmanynegativeconsequences.72 

Urban sprawl makes it difficult to organise services: health 
care for the elderly, primary and secondary education 
for the youngest, etc. This leads to an increased risk of 
social isolation. As sprawl often takes place outside local 
administrative areas, the tax base financing public services 
may not coincide with the territorial distribution of the 
users. 

Urban sprawl results in increased energy consumption and 
congestion. There is an increased use of private cars in 
places where sprawl makes it too difficult and costly to 
implement good public transport due to low population 
density. Road infrastructure upgrades then become the only 
way to reduce travel time and improve accessibility, which 
in turn contributes to further urban sprawl in a vicious cycle. 

Urban sprawl leads to spatial segregation and social exclusion. 

The distance to basic services such as education, health and 
social services, and the lack of satisfactory public transport to 
homes and work and education places make people more and 
more car-dependant. Urban sprawl, therefore, excludes people 
who cannot afford to own or use a car, and who do not have 
the alternative of walking, cycling or taking public transport. 

Urban sprawl contributes to the loss of agricultural land 
and the increasing percentage of soil sealing, resulting in 
increasing risks of flood in urban areas. This consumption 
of agricultural land is foreseen to continue in all parts of 
Europe.73 

Urban sprawl is behind the loss of biodiversity and the 
overexploitation of natural resources. Infrastructure 
development and urban sprawl results in a continued 
expansion of artificial surfaces across Europe at the expense 
of agro-ecosystems, grasslands and wetlands.74 Our current 

rate of natural-resource exploitation is steadily reducing 
biodiversity and degrading ecosystems, and, therefore, 
threatens urban and rural territories’ sustainability.75 

Urban sprawl contributes to the economic decline of the 
traditional city centre. Functional mix has always been a 
characteristic of city centres. In fragmenting living and 
working spaces and in pushing companies or research 
centres outside city centres, urban sprawl may negatively 
impact on the economic dynamics of city centres. 

2.4.2. Urban ecosystems under pressure 
In many ways, cities offer solutions for a more sustainable 
way of life, but despite improvements in air and water 
quality, as well as efforts to mitigate and adapt to 
climate change, European cities still face a number of 
environmental challenges. As engines of growth and 
generators of wealth, cities are also drivers of consumption 
and use of material resources. 

The density and compactness of cities reduce energy 
needs for heating and mobility, and offer possibilities 
for more efficient land use. But density in itself raises 
important questions about the environment’s capacity to 
accommodate the concentration of waste and pollution 
brought by density. Natural ecocycles, especially those 
for water, are being disrupted by a lack of natural soil and 
wetlands. The scarcity of land within cities creates pressure 
for an uncontrolled expansion outside the city cores driven 
by price rather than environmental considerations. Waste 
generation leads to land being used for landfills. The 
concentration of fine particles in the air has adverse effects 
on health. Noise pollution is amplified by concentrations 
of activities, in particular transport, and the use of hard, 
sound-reflecting materials, causing health problems.76 

72 Thematic sub-group under the Territorial Cohesion and Urban Matters Workgroup, Final Report on Urban and Development Sprawl, July 2010. 
73 A consortium of institutes working on strategies and development of sustainability assessment tools for urban–rural linkages, 
the PLUREL project (Peri-urban Land Use Relationships) www.plurel.net. 
74 Between 2000 and 2006, agro-ecosystems, grasslands and wetlands respectively lost 0.9%, 1.2% and 2.7%. During the same period, 

there has been an 8% increase of artificial surfaces in Europe. Corine Land Cover Inventory, EEA, 2010. 
75 http://www.eea.europa.eu/publications/eu-2010-biodiversity-baseline/flyer-european-biodiversity-baseline-2014. 
76 European Environment Agency, The European Environment – State and Outlook 2010, Urban Environment, 

Copenhagen, 2010. 


Figure2 Trends in the use of material resources in the EU-15 and in the recently acceded EU-12 countries 
compared with GDP and population (EEA, 2010a) 

In de x1970 =100 EU–15 
In de x1992 =100 EU–12 


260 
240 
220 
200 
180 
160 
140 
120 
100 
80 


260 
240 
220 
200 
180 
160 
140 
120 
100 
80 

G D P P o p u l a t i o n D M C 
M a t e r i a l p r o d u c t i v i t y D M C / c a pita 
DMC: Direct Material Consumption. 

Why is the depletion of natural resources 
a concern for Europe?77 

In general, lost natural ecosystems and soil degradation 
damage a wide range of ecosystem services, including 
carbon and water cycling, and provision of food and 
fibre. Food and water security is a key concern here. 
The fragility of global food systems has become 
apparent over recent years. Driven by recurring food 
and economic crises throughout 2006 to 2009, the 
number of undernourished people in the world rose 

to more than one billion in 2009. The proportion of 
undernourished people in developing countries, which 
was previously declining, has also risen in the past few 
years (FAO, 2009). Ultimately these trends may lead to 
regional conflicts and social instability. Potential impacts 
on Europe include changes in the abundance of species, 
climate change, increased demand for and degradation 
of domestic resources (such as food and timber), and 
environment-induced immigration from developing 
countries. 

77 European Environment Agency, The European Environment – State and Outlook 2010, 
http://www.eea.europa.eu/soer/europe-and-the-world/megatrends/decreasing-stocks-of-natural-resources. 


Cities of tomorrow -Challenges, visions, ways forward 

A global depletion of natural resources leads to a global 
competition for resources. The future competitiveness and 
vulnerability of European cities are dictated by the cities’ 
ability to shift to a less resource-intensive production 
and way of life, with less waste generation and increased 
recycling. Water is already periodically a scarce resource 
in many European cities, and water scarcity will increase 
with global warming. In addition, the reduction of wetlands, 
natural sinks and unsealed soil, in combination with the 
expansion of cities along ancient sea or riverbeds or their 
location along coastlines or river banks, dramatically 
increases the risk of flooding as climate change kicks in. 

2.5. A diverse governance system 
The manner in which cities are governed varies greatly 
across the Member States: the numbers of administrative 
tiers or government levels range from two to four78 ; the 
average population size of the lowest tier (communes or 
municipalities) ranges from less than 2000 to over 150000. 
Although four-government-tier countries usually have 
a higher number of municipalities – e.g. well over 36000 
in France, 12000 in Germany and 8000 in Italy and in Spain 

– the United Kingdom, also a four-government-tier country, 
has only 406 municipalities.79 In some countries, additional 
intermediary structures, such as groupings of first-tier 
government, have been set up to facilitate joint planning 
and action around strategic issues or joint infrastructure. 
The number of government tiers does not give any 
indication of the influence of the municipal level within the 

national government system. Powerful local administrations 
are those which exercise a high level of political autonomy 
and control over their budget by local taxation.80 High 
tax autonomy alone does not equal high political 
autonomy, which depends on whether large spending 
posts with little room for manoeuvre – such as education 
and health services – are financed locally or by a higher 
tier of government. In some countries, (major) cities are 
given a specific status that brings additional resources and 
responsibilities81 . 

Many Member States have undergone a decentralisation 
trend during the last thirty years, but decentralisation 
has in many cases been used as a means for higher 
government tiers to cut budgets, and increased local 
responsibilities have not been followed by the related 
resources. Decentralisation is associated with higher 
accountability, flexibility and efficiency, but too high a 
degree of decentralisation may not be suitable for more 
complex tasks and investments which need substantial 
financial resources or territorial coordination. There is also 
an additional risk of over-bureaucracy and corruption.82 

The differences in regulatory and funding powers give cities 
very different possibilities for acting on the pressing issues 
on which their attractiveness and economic and social 
developments depend, even if they do not have formal 
responsibility for them. Cities’ own resources in terms of 
human resources for urban and strategic planning vary 
greatly across Europe. Housing is one of the most important 
questions for cities, but not all cities have competencies 
in this area. 

78 
Two-government-tier countries (one central, one sub-national): Bulgaria, Cyprus, Estonia, Finland, Lithuania, Luxembourg, Malta and Slovenia; 
three-government-tier countries: Austria, the Czech Republic, Denmark, Greece, Hungary, Ireland, Latvia, the Netherlands, Portugal, Romania, 
Slovakia and Sweden; four-government-tier countries: Belgium, France, Germany, Italy, Poland, Spain and the United Kingdom. 

79 Figures provided by the Council of European Municipalities and Regions, on the basis of data from their member associations. 
80 Second ‘State of European Cities Report’, op. cit. 
81 Second ‘State of European Cities Report’, op. cit. 
82 Second ‘State of European Cities Report’, op. cit. 



Figure3 Proportion of city income derived from local taxation 

By country, macro-region and city type, 2004 (in %) 


Note: Type A = “Principal Metropolises”; Type B = 
“Regional Centres”;Type C =“Smaller Centres”;Type D = 
“Towns and Cities of the Lagging Regions” (see section 

2.1 for explanation; here the type A category has been 
subdivided into capital cities and non-capital cities). 
Cities in the Nordic (Denmark, Finland, Sweden and 
Norway) and Baltic (Estonia, Latvia and Lithuania) 
countries depend more on local taxation (ranging 
from 40% to 70%) than cities in other parts of Europe; 
Swedish cities derive the largest share of income from 
local taxation. Variation between countries in Central 

2.6. Conclusions – a challenging 
future for the Cities of tomorrow 
The European model of urban development is based on 
economic, social and territorial cohesion and sustainability. 
A diagnosis of the state and outlook of European cities 
points to a number of threats to the European model of the 
city as presented in Chapter 1. 

The negative effects of globalisation, downward 
demographic trends and the economic crisis threaten 
economic, social and territorial cohesion. We are witnessing 

and Western Europe is much more pronounced, with 
local taxation rates ranging between 0% and more than 
70%. Western European countries exhibit a relatively 
heterogeneous pattern, ranging from 5% to 55%. 
Among the Southern Member and Non-Member States, 
Greek and Turkish cities only derive a small share of 
their income from local taxation (under 10% in Greece 
and under 20% in Turkey), while in Italian, Spanish and 
Portuguese cities the local share is higher and there 
is greater variation between cities. 

Source: European Commission ‘State of European Cities’ Report 2010 

increased socio-economic polarisation and segregation. 
There is a marked risk that the increased diversity of 
the European urban population will lead to social 
fragmentation. Governance systems that have not evolved 
as quickly as governance needs, coupled with the growing 
role of private economic interests, may lead to increased 
urban sprawl, non-sustainable use of natural resources and 
energy, and increased spatial segregation. 

The territorial dimensions of urban development cannot 
be ignored. The success of cities in adapting to new 
economic circumstances is not only an internal matter for 


Cities of tomorrow -Challenges, visions, ways forward 

the cities themselves but also a concern for the rural areas 
surrounding them. When we take into account the diversity 
of cities’ situations in Europe, from global innovation hubs 
to abandoned manufacturing sites, it is clear that cities face 
very different realities and challenges. If we want to keep 
the European urban development model alive, it is vital that 
cities in crisis manage the transition to more sustainable 
development trajectories. We need policies for cities in 
crisis as well as policies for successful cities, otherwise we 
risk seeing a two-speed Europe with huge negative social, 
economic and environmental consequences. 

Although the outlook for many cities may appear gloomy, 
there are also opportunities to turn the major problems 
into more positive challenges. This demands that cities 

manage the transition to new development models that 
are green as well as inclusive and economically sustainable. 
Competitiveness in the global economy has to be 
reconciled with sustainable local economies, which demand 
an anchoring of key competences and resources in the local 
economic tissue. Social and spatial segregation have to be 
countered. Governance systems need to be adapted to 
evolving circumstances and include a territorial approach. 
Public services and city strategies need to adapt to diverse 
situations of shrinking budgets and populations, or growing 
migration, or economic growth which leaves an increasing 
number of people behind. 


3. The Main Challenges 
for the Cities of tomorrow 

Cities of tomorrow -Challenges, visions, ways forward 

3.1. Introduction – what can we 
say about future challenges? 
A challenge is a ‘task or situation that tests someone’s 
abilities’.83 ‘Challenge’ is often used as a euphemism for 
‘problem’, but problems become challenges only if they are 
reformulated into a more or less daunting task. The same 
problem may give rise to different challenges – e.g. if a 
fire is the problem, the challenge might be either how to 
escape the fire or how to extinguish it. The same challenge 
may also address several problems, so for example if the 
challenge is ensuring sustainable urban mobility, the 
problems addressed may include obesity and health 
problems, segregation and exclusion, traffic congestion, etc. 

The future is what is still to come. In that sense it can be 
anything from now to eternity. For our purposes, the future 
is related to the nature and timescale of the challenges and 
the possible strategies for addressing them. The challenge 
of reducing greenhouse gas emissions has one time 
horizon, the mitigation of the negative effects of climate 
change another. 

The challenges faced by the Cities of tomorrow are those 
that we believe will be the most influential in a long-term 
perspective that goes beyond this decade. The future that 
interests us is the one that goes beyond the immediate and 
beyond the normal planning horizon, where many possible 
futures open out. 

Without the ability to both predict the future and 
understand the specific situations of every single European 
city, we cannot be precise about our cities’ most important 
future challenges. It would require the ability to foresee 
disruptive events and wild cards. For example, the recent 
upheaval in the Arab world came as a complete surprise 
to most Member States’ governments and illustrates the 
way unpredictable events, or chains of events, can have 
far-reaching consequences that dramatically change a given 
situation or alter a development trajectory. 

That said, many drivers behind the main challenges evolve 
in a stable and more or less predictable way. For instance, 

the ageing of the EU population may be projected with 
accuracy over a long period; globalisation will continue 
to exercise a strong influence on the location of firms and 
the evolution of the labour market; and the simulations 
and models of climate change and its effects are becoming 
increasingly precise. Therefore, it is possible, if not to 
predict, then to at least have a good understanding of the 
types of challenges our cities will face. 

This chapter focuses on what experts consider to be the major 
challenges that cities have to address to achieve a desirable 
future. Our ambition is to be neither exhaustive in terms of 
challenges for the Cities of tomorrow, nor speculative and 
focus on challenges that may materialise in the unknowable 
future; we simply want to raise awareness of the type of 
challenges cities are, and will be, facing, and that will have 
a strong influence on their future. 

Challenges cannot be addressed individually; their inter-
relations and contradictions need to be properly understood. 

Challenges can rarely be isolated from each other and 
treated independently, as they are interrelated, often 
with seemingly contradictory objectives. For instance, 
the challenge of turning cities carbon-neutral must also be 
understood through a social inclusion perspective, where 
green technology needs to be accessible for all if we want 
to avoid energy poverty and exclusion. 

We would also like to draw attention to the way challenges 
are formulated and the type of governance frameworks 
that are put in place to address them. A challenge is 
never neutral. The way it is formulated reflects values and 
priorities. 

Challenges need to be formulated to align with our overall 
objective of sustainable territorial development in liveable 
cities all across Europe. Our overall objective, or our value 
base, is the European model of urban development 
presented in Chapter 1 (see section 1.5). This should be 
reflected in the way challenges are formulated. 

The challenges for the Cities of tomorrow are not problems 
to be solved but opportunities to be exploited. Chapter two 

83 www.oxforddictionaries.com 

