Across Europe, cities are at the forefront of addressing critical challenges such as climate change, social inequality, and economic transformation. While they are expected to drive sustainable change and commit to ambitious European targets like climate neutrality and social cohesion, many face serious funding shortages that hinder their ability to implement the essential actions to reach those goals.
“Economic development, and social cohesion, are two sides of the same coin. We cannot reach prosperity without social innovation, and for social inclusion we need economic growth,” said Juan Mari Aburto, Mayor of Bilbao, in his opening remarks at Eurocities Economic Development Forum 2024.
“Cities have the operational capacity and the transformative power to shape the future, in close collaboration with citizens,” expressed André Sobczak, Secretary General of Eurocities. “However, they need the financial capacity and skills to be able to do it.”
We cannot reach prosperity without social innovation, and for social inclusion we need economic growth
Under this backdrop, the Eurocities Economic Development Forum 2024 convened in Bilbao under the theme ‘Cities in transition: towards a sustainable, inclusive, and prosperous future.’ During three days, public authorities, policymakers, and stakeholders from Europe gathered to discuss actionable solutions for funding, innovation, and skills development in European cities. The forum’s discussions centred around the challenges and opportunities that cities face as they work to become the growth engines of Europe’s green, inclusive future.
Financing the transition
As the latest edition Eurocities Mayors Pulse Survey showed, there are critical gaps in public investment, in particular, for climate action and energy transition. Though cities have developed innovative financing models, including public-private partnerships and European Innovation Funds to support energy projects, complex EU procedures continue to limit access to resources.
European cities often struggle to attract private capital to critical redevelopment areas without public backing. “What private capital would invest in the renovation of a polluted urban area? None,” noted Marco Garza, Councilor for Budget and Human Resources in Brescia. “That’s why the goal of institutions should be to make funds available for urban transformation – this is the only way to achieve real change.”
The EU needs to recognise that cities are the first line of policymaking
Accessing EU funding is often time-consuming, with administrative hurdles that stretch the capacities of local governments. Francisco Manuel Paloma, Finance Councillor in Fuenlabrada highlighted the need for streamlined funding processes and long-term funding commitment, saying, “We need the EU to make sure cities can fully play their role” and efficiently manage funds for transformative projects. “We need more flexibility in EU funds,” added Beppo Brem, City Councillor from Munich, who acknowledged accessing EU funding is time-consuming, and not all municipalities have enough resources to invest in the task.
Cities at the forum called for changes in the EU’s financial framework, urging simplified access to funds, long-term investment options, and the flexibility to combine different funding streams. “The EU needs to recognise that cities are the first line of policymaking,” remarked Vincent Languille, Councillor for European Funds and International Relations, Aix-Marseille-Provence. “When there’s something wrong going on, people turn to their Mayors, not to the MEPs, because we are the ones in contact with local needs, with the people,” he added, highlighting the need for better coordination and closer ties among all levels of government to facilitate local projects.
“The EU should prioritise cities as they hold the majority of its population,” shared Eider Inunciaga, City Councillor from Bilbao. “That is why cities should have an important place in the next Multiannual Financial Framework (MFF) of the European Commission.”
Innovation is about solving urban, economic or social challenges, it needs to have a purpose. If we don’t know why we are innovating, it’s better not to start at all
Cities as testbeds for innovation
Facing global competition and rapid technological advancements, European cities are emerging as hubs of experimentation and innovation. However, with lower business creation rates than their counterparts in the U.S. and China, European cities must overcome barriers to maintain competitiveness.
“Cities are laboratories of experimentation,” said Josep Piqué, Executive President of Technova Barcelona–La Salle Innovation Park, who emphasised the need for “a quadruple helix that connects universities, governments, companies, and citizens” to ensure that innovative solutions are inclusive and leave no one behind.
By enabling public-private cooperation, cities can transform into innovation districts—spaces dedicated to economic and social growth fuelled by technology. For instance, Bilbao has transformed industrial spaces into areas for culture, technology, and innovation, with incubators and testbeds emerging across the city. These initiatives are instrumental in making the city an ideal ecosystem for startups, businesses, and research institutions to pilot solutions in real-world settings.
Urban regulatory sandboxes play a pivotal role, allowing cities to trial new technologies without the usual constraints. As Geana de Miranda Leschko, Coordinator of Innovation Projects and Urban Planning Law at Techfriendly, noted, “The tools for urban sandboxes, living labs, and testbeds are there; it’s about combining them effectively.” This regulatory flexibility not only attracts investment but also facilitates the scaling of clean technologies, aligning with the EU’s Net-Zero Industry Act.
As Piqué described, “Innovation is made of three ingredients: technology, finance, and talent. And at the same time, innovation is about solving urban, economic or social challenges, it needs to have a purpose. If we don’t know why we are innovating, it’s better not to start at all.”
Building skills for the future
Indeed, innovation ecosystems rely heavily on local talent. Yet, cities struggle with retaining skilled workers, especially students who often leave after completing their studies. According to Ellis Immerzeel, Program Manager for Economy and Employment in Twente, “Talent retention is essential, and fostering local connections is one way to encourage long-term residency.” Local governments can encourage retention through targeted programs, partnerships with universities, and even creative ideas like dating apps aimed at connecting talent socially and professionally.
The future of cities depends as much on technology as it does on people.
According to Isabel Urbano, Upskilling and Reskilling Manager at Novia Salcedo, the success of urban transitions lies in more than just technical know-how: “The future of cities depends as much on technology as it does on people. Soft skills are the key for citizens to be agents of change, not just passive recipients of policies and technologies.”
Soft skills—such as adaptability, critical thinking, and collaboration—are increasingly seen as foundational to a successful urban transition. In Bilbao, for instance, where the economy is adapting to both digital and environmental demands, efforts to strengthen these skills among the local population have grown. Urbano highlights that building trust and fostering a participatory spirit are vital to overcoming resistance to change. “Urban transitions require not only technological advances but also a profound change in the way people collaborate, create, and adapt,” she noted.
In some rapidly growing urban areas, skills gaps threaten economic stability, while other regions face a “brain drain,” where highly qualified individuals relocate to larger cities or even outside Europe.
We must take into account the gender perspective
Addressing these challenges also means broadening access to training programs and establishing supportive ecosystems where skills can flourish. Iñigo Larrea, Talent Manager at MONDRAGON Corporation, emphasised the role of local universities and vocational centres in bridging skill gaps, particularly through collaboration with city governments and private sector stakeholders.
MONDRAGON’s partnership with Bilbao Ekintza, Bilbao’s public economic development agency, exemplifies how collaboration can foster the development of skills tailored to local needs.
Adding to this, Lorea Gómez, General Manager at the Basque Center for Applied Mathematics (BCAM), pointed out the need for a more inclusive approach in nurturing talent from within local communities. “We must take into account the gender perspective. When we read letters of recommendation, women are described as hard-workers, detailed-oriented, taking care of co-workers. However, men are described as brilliant, creative, proactive.” This bias, she argued, has implications for the types of skills that are nurtured and valued in different segments of the population.
