Unpredictable Patterns #103: Europe and the great city experiment
The case for Nordic and Baltic countries to actively pursue exemptions from European legislation for a group of future-oriented cities
Dear reader,
Thank you for all the comments on last week’s piece. While Europe is not the only region with demographic challenges, I focused on Europe to highlight the ways the union could work to ensure that it uses what looks like a crisis as an opportunity to revisit the policy frameworks it acts within. As some of you pointed out the reverse demographics - like in Africa - also offer some pretty fantastic opportunities for AI-policies, and this is something I would like to come back to later. In this week’s note we will discuss how Europe could mitigate the growing pessimism around the region, and why cities may well be the key to doing so. In #91 I discussed the city as software - highlighting why we should expect to see city-sized AIs, and why cities (in spite of some justified skepticism) are the most exciting level of policy making. In this note I want to explore that further, and how it could provide Europe with an interesting opportunity.
Cities as vectors of change
One reason we want to focus on cities is that city decision-making is fundamentally different from national decision-making. In a parliament, decisions need to account for various equities, agency complexities, international relations, and national politics - often ending in the gridlock we unfortunately see today. City decision-making, however, stays closer to the center and must focus on producing utility for citizens. This makes city governance more efficient, more outcome-focused, and driven by real felt needs.
Now, this is somewhat idealized, but there are clear differences between city and parliamentary decision-making that make cities compelling as policy vectors. In cities, decisions are immediately felt by citizens, creating shorter evaluation cycles. Cities also seem to attract talent differently than nation-states do.1 While talented young people still enter national parliaments, those interested in real political change often see the city level as their best chance for impact.
One consequence of this is that city politics actually is less angry. A recent study into the differences between city politics and national politics even suggested that the nationalisation of politics may well be what drives polarization. The authors of the study note:2
In light of our findings that national political discourse sparks more anger and negativity than local political discourse, future research may further explore whether the nationalization of politics drives political polarization. A longitudinal analysis on political nationalization and polarization over time would provide valuable insight into how the nationalizing political landscape may contribute to political tensions.
This polarization is driven by a change in language as politicans scale the ladder to the national level:3
For those seeking to ascend the political ladder, it may pay to use more abstract, moral, and power-centric language. However, as our social worlds increase in scope and complexity, it is important to both remember the importance of local issues, and to discover ways for large and diverse groups of people to effectively coordinate without stoking conflict.
Another survey found that local governments navigate polarization better than national governments - and suggested that this may provide some inoculation against the growing polarization challenges.4 However, there are some worrying signs that local politics are more and more infected by national politics.5
Engines of change
We should also want to ask ourselves: where does change originate? When we think about political change, we often imagine broad, abstract waves affecting nations or regions. But if we consider change as a sequential process, we must examine where it begins - where political opinions form, where parties emerge, where sentiments crystallize. I believe there's a strong argument that this happens in cities. Even federal or European-level political change likely starts in cities. Historically, change originated in coffeehouses and beer halls - places deeply connected to the modern city.
Consider the Italian city network around Florence, Flanders or the Hansa - arguably times of peak creativity, economic prosperity, and cultural advancement - cities can certainly play the role of innovation engines as well as core trade hubs. Let’s look at what we know about city networks and how that could apply today.
European city networks thrived largely because of their centrality to trade routes and strategic coastal or riverine locations. By the 14th century, the Hanseatic League alone linked over 70 ports across the North and Baltic Seas. This concentrated maritime access allowed merchants in Lübeck or Hamburg to tap into both east-west and north-south flows of grain, timber, textiles, and luxury goods. As a result, certain urban populations grew quickly: Lübeck’s population more than doubled from roughly 10,000 in 1300 to over 20,000 by 1400—impressive for that era. Such numbers highlight a critical mechanism: controlling trade chokepoints not only conferred wealth and power but also facilitated rapid exchanges of ideas and technology.
Today, you want to make sure that rivers of capital and talent flow through key cities and connect innovation networks.
Another key to success was the development of financial instruments, backed by powerful families and guilds in cities like Florence, Venice, Bruges, and later Amsterdam. Florence’s tax registers show that total assessed wealth nearly doubled in the 14th century, aided by advanced banking practices and credit networks.6 In the Low Countries, the early joint-stock companies and bourses in Antwerp and Amsterdam fueled the rapid expansion of capital, enabling higher-risk ventures and maritime expeditions. Such mechanisms were undervalued but pivotal: capital concentration in urban centers stimulated continuous reinvestment in local crafts, technology, and luxury production.
How can Europe again become the home of such financial innovation - in things like crypto, but even broader than that in building out new mechanisms for incorporation and joint ventures? New kinds of exchanges?
Crucially, many medieval and Renaissance cities negotiated charters granting autonomy from feudal lords or monarchs, giving them the legal powers to regulate commerce and settle disputes efficiently. The establishment of civic courts, urban constitutions, and merchant law codes (lex mercatoria) streamlined trade interactions. For instance, by 1500, over 150 towns in Europe had some form of written privilege or charter, reducing internal tolls and formalizing contract enforcement. This legal environment fostered innovation by lowering transaction costs and creating more predictable business conditions—a fact often overlooked in discussions of medieval growth.
We will come back to this notion, because there is a strong case for reintroducing such charters and privileges today - and building city clusters that are exempt from the European acquis.
City networks also facilitated cultural and intellectual exchange. Universities in Bologna, Paris, and Oxford attracted scholars from all over Europe, spreading ideas that eventually fueled the Renaissance. Printing presses, first established in cities like Mainz (c. 1450s) and later multiplying across trade hubs, allowed knowledge to flow at unprecedented rates. High urban literacy rates (Ghent’s late 15th-century male literacy is estimated above 30%) meant these networks had the human capital to absorb and build on new ideas. This synergy of commerce and scholarship is, it too, a frequently undervalued factor in explaining how such networks catalyzed Europe’s leaps in art, science, and philosophy.
How can we connect private R&D with public education, open universities and research institutions and broaden the participation in our shared scientific project? That should be a European policy priority.
Finally, the very fragmentation of Europe—where dozens of city-states, principalities, and leagues coexisted—generated constant competition. Venice vied with Genoa, Bruges competed with Antwerp, and the Hanseatic towns jockeyed for trade privileges. While often leading to conflict, it also spurred improvements in ship design, accounting techniques, and governance structures. Historians like Jan de Vries and Carlo Cipolla point out that this competition regularly caused upward pressures on innovation.7 Considering that urbanization rates in highly successful regions (like northern Italy, Flanders, and later the Dutch Republic) often surpassed 20–30%—substantially higher than the European average—underscores how these clustered city networks collectively formed the backbone of Europe’s growth.
Can we return to cities to build a better European future?
Challenges and solutions
We shouldn't underestimate the challenges. Many cities lack autonomy - their policy options are limited. Innovation is often seen as a national interest, and while cities want to innovate, the mechanisms are usually controlled nationally. There's also enormous variety among cities - some attract talent and capital while others fade away.8 Simply clustering random cities won't work. We need to look for complementarities, similarities, compatibility - things like cultural and language alignment, talent flows, university collaborations, and existing financial networks. And of course, cities need more money. To make the kinds of decisions we'd like them to make, they need larger budgets and more budgetary influence over questions typically kicked up to national parliaments.
How could we solve this? How could we deal with the problems of autonomy, city variety, and insufficient budgets? There are some promising possibilities if we're willing to think unconventionally. First, we should consider creating autonomous networks of innovation. There's a strong case for exempting a group of cities from European legislation. What if we could say that for this particular group of cities, we won't apply European legislation, but instead ask them to develop their own rules on things like artificial intelligence, data protection, and copyright? We'd allow experimentation for a limited time to learn what's possible with a different rule set.
Returning to the idea of city network autonomy - the privileges Europe used to deploy well, and which underpinned a lot of Deng Xiao-Ping’s rejuvenation of China9 - would give us the means of experimentation.
We could even imagine city networks entering into their own trade agreements with other regions of the world, and having international agreements with foreign states, if we wanted to.
The regulatory curiosity and inventiveness this requires might be daunting, but it would teach us something important about how our regulatory systems work. Worst case, we validate that our existing European regulations are already optimal. Best case, we find ways to improve European regulation to a point where its quality stands out globally - tested not by external forces but by European ingenuity, creativity, and innovation in a cluster of exempted cities.
Possible projects
What could these cities do? There is a wealth of possible projects that would be interesting to pursue. Let’s have a look at a few things that could be interesting to scope out:
Federated Health Data Hub
A shared, anonymized health repository across multiple cities that enables AI-driven research (e.g., predictive disease modeling). Historically, large-scale health data (like the Framingham Heart Study in the US10) has led to breakthroughs in understanding cardiovascular risks. Here we would have a core set of health data collected, perhaps daily, and offered to any company that wants to lead in health innovation.AI-Enhanced Urban Planning
A regional digital twin, using real-time data on traffic, pollution, and energy use to model and predict city changes. Similar to Singapore’s Virtual Singapore project11 but scaled across several European cities. And make it transparent so citizens have access to data about spending - enabling citizen audits.Pan-City Smart Grid
AI-managed energy distribution that pools resources across cities. This could draw on experiences from Denmark’s strong wind-energy grids, applying machine learning to coordinate supply, demand, and storage.12 Target key nodes where the grid could be strengthened, such as a neighbourhood that could put solar on roofs and subsidize just that neighbourhood for the good of the grid.AI-Accelerated Clinical Trials
A shared platform for faster drug and therapy testing, using real patient data to run virtual trials. The UK Biobank study13 shows how large, quality datasets can accelerate breakthroughs. This is a controversial one - should clinical trials really be city-sized? But let’s explore!Predictive Public Safety System
Cities share data to identify patterns of crime, accidents, and emergency calls. Anonymized data could fuel safer urban design, akin to New York’s CompStat but adapted for multiple jurisdictions.14 And we could trace and track criminal networks as they expand - because they are multi-city already.Multi-City Autonomous Vehicle Corridor
Dedicated lanes connecting cities for driverless shuttles and delivery vehicles. Inspired by existing test corridors in Germany (like the A9 testbed15), but using exemptions to speed R&D, collect data and refine the system.Crypto for Social Services
Blockchain-based platforms for transparent distribution of benefits and universal basic income trials. Could track outcomes with AI analytics, similar to smaller pilots in Finland.Sustainable Water Management
A cross-border AI system that predicts droughts, floods, and water quality issues, coordinating water supply.Multi-City Identity and Access Platform
A digital ID with shared authentication for public services, combining blockchain and AI for fraud detection. Estonia’s e-Residency program16 offers a precedent, but expanded regionally.AI-Optimized Public Procurement
Use AI to compare bids, spot corruption, and streamline processes. Historical data from the EU’s procurement registers could help identify cost-effectiveness and compliance issues.Mass-Scale Language Translation Hub
A real-time translation system for local government interactions in multiple European languages (like the European Commission’s eTranslation initiative, but more advanced and open to private AI firms).Shared Robo-Logistics Network
Automated warehouses and drone/robot cargo deliveries optimized with AI. Similar to Amazon’s multi-warehouse approach, but regionally integrated across city borders.AI-Driven Circular Economy Exchange
A platform that matches surplus goods, materials, and waste with those who can reuse or recycle them.Green Tourism Recommendation Engine
Region-wide AI tool to promote environmentally friendly travel and local experiences, reducing over-tourism.Cultural Heritage Digitization and AI Preservation
A comprehensive project to digitize archives, museums, and libraries, using AI to restore and enhance cultural artifacts. Think of Europeana, but scaled up with advanced machine learning to deepen historical research, and made locally.
There is no end of ideas if we get to work, and the key here would be to start with what is good for the city and then work from there. And this is just a selection of the projects you could run, and the domains where startups could be encouraged to explore collaborating with the city.
A word on the legislative framework
Ok, so let’s be honest here. By now you are thinking that this would never work - because, well, law. European law in specific would never allow for exempting cities from the acquis communitaire.
Well, I actually think this is more a question of political will than law. It will not be ease to propose, drive and force this issue. There will be a lot of resistance to the idea of carving out regions like this for innovation and even the idea that innovation is not optimally encouraged within the European legislative framework will to some seem heritical.
But the reality is that more and more actors are giving up on Europe. The sentiment that Europe is slowly devolving into a museum or even an economic backwater, without any technological future or innovation capability is wide-spread, and recognizing that there might be ways of improving is not the same as giving up on what we have done so far. The bet we are suggesting with the city networks is one where countries allow for the possibility that there might be better ways forward. That is all.
If we agree that this is worth trying, and if there is national political will - is there then a legislative way forward? How could a nation argue for something like this?
Giving a comprehensive answer would require more legal expertise than I command, but let’s look at a few possibilities at least - just to make the point that they exist. All of these are speculative and wild, but the point is that there is a place to begin if we want to.
Treaty Amendment (Article 48 TEU)
EU treaties can be amended by unanimous agreement of the Member States. A treaty revision could carve out special territories (the “exempted cities”) by explicitly limiting or excluding the application of EU law, taxation, and regulation in those defined areas.
Unanimous Derogation Clauses
Specific legislation can include derogation clauses, which allow Member States to deviate from general EU obligations under narrowly defined conditions. If all Member States agreed to insert derogation provisions targeting certain urban areas, a “network of exempted cities” could be established. This would allow for very specific privileges.
Enhanced Cooperation Mechanism (Articles 326–334 TFEU)
Typically used to allow a subset of Member States to integrate more closely. Theoretically, one could invert the logic: a group of Member States agrees on rules exempting designated cities from certain EU obligations, creating a form of “negative integration” for those regions.17
Status as Outermost Regions (Articles 349–355 TFEU)
The Treaties already grant special tax and regulatory treatment to EU outermost regions (like certain French overseas territories). Extending a similar status to certain continental cities (though unconventional) would require a treaty-level or secondary-legislation extension of these derogations.
International Agreement Outside the EU Legal Order
Member States could negotiate an intergovernmental agreement outside the EU framework and then incorporate it into EU law by treaty amendment or protocol. This arrangement could recognize certain cities as having “special autonomous status,” placing them outside standard EU rules.
Pilot Projects / Regulatory Sandboxes
The EU does allow for time-limited “regulatory sandboxes” (particularly in finance or tech). A broader interpretation could expand this into pilot cities, exempted from certain EU regulations to test alternative governance or economic models. Prolonging or formalizing these sandboxes would require legislation.
Lex Specialis in Secondary Legislation
The principle of “lex specialis” means that more specific legal rules can override more general ones. If the Council and Parliament adopted specialized regulations stating that certain designated zones or cities fall outside usual EU tax and regulatory rules, that lex specialis could possibly trump the general framework.
Sectoral Derogations (Services, Goods, Capital, People)
In some areas (e.g., state aid, environmental directives), the EU already grants exemptions or reduced obligations. A more ambitious version could see a coordinated wave of sector-specific derogations for these cities. While complex, it might piecewise exclude cities from most EU obligations.
Use of Protocols Attached to the Treaties
Protocols are often used to clarify or set out exceptions to treaty obligations (e.g., Denmark’s opt-outs). A new protocol could be drafted that specifically delineates certain cities as outside the scope of EU law and taxation, subject to unanimous agreement.
National Constitutional Revisions Accompanied by EU Recognition
Each Member State in the group could amend its own constitution to declare these cities “extra-territorial” or “semi-sovereign.” They would then negotiate with the EU institutions to gain recognition of this status through an EU legal instrument—effectively making the cities exempt from EU law within the states’ territory.
Each and everyone of these is unlikely, for sure. It would require strong political will and ambition. But are they impossible? Absolutely not - and we saw this during the pandemic. If anything we should remember that when there is a sense that we are in this state of emergency, then political will can craft solutions without getting stuck on legislative roadblocks. Even just proposing this would get the debate started, and maybe there should be some sense of urgency within a Europe that is in “an existential crisis” according to the head of its own Central Bank?
The Kogge network
I think the Nordic and Baltic countries have a fantastic opportunity here. There's an impressive set of cities around the Baltic that could work together, with all the interoperability and compatibility we talked about, plus existing ties. To make this work, these cities would need permission to build something unique - a temporary autonomous zone where they can craft what they believe to be the best legislation for the future. Then we can see if they attract companies, entrepreneurs, and capital, and explore whether this network can outperform or contribute to Europe's future in new ways.
This wouldn't compete with Europe - it would rejuvenate it. The idea is that we can do this within Europe if we allow for some regulatory agnosticism, acknowledging that maybe our current rules aren't optimal for international competitiveness in a world of rapid technological change. It's like Oliver Cromwell's quote: “I beseech you, in the bowels of Christ, think it possible that you may be mistaken.”
So consider this thought experiment: What if the Nordic and Baltic countries announced the Kogge network, named after the European ship that empowered the Hansa? This network of cities around the Baltic Sea would have a mandate to develop rules for everything from data protection and AI to taxation, trying for several years to build Europe's most competitive and innovative region. We'd do this to see if we could reinvent, renovate, and reimagine how Europe works, with the Kogge network serving as an ongoing benchmark or experiment.
There is a special kind of criticism here that I would like to address. Would this be undemocratic? I don't think so. It would actually bring decision-making and democracy closer to citizens in cities. One of democracy's current problems might be that it has lost its place - literally. It has no relationship to place anymore. To boost democracy, we might need to actually locate it and bring it back to the cities it came from. Democracy is a city regime, built on and in cities, originating in the Greek cities of old. When it turns into this abstract, decoupled ideology and regime, it may actually suffer (as we saw in the earlier cited studies). So maybe this would be not just a technical and economic experiment, but equally a democratic one.
So what?
Ok, so let’s agree that what is proposed here is unlikely. An exempted network of cities in Europe? Driving innovation and exploring the future without the regulatory framework - or with the parts of it it choses to adopt? That seems like a pipe dream at best.
Here is the thing: what I have described here is just an ideal. There are many versions of these city networks that could have a significant impact, even without city privileges. So just building these clusters themselves, and starting to think in cities will be helpful for Europe.
If it takes ten, twenty or thirty years to get to a place where we allow for more regaulatory innovation and diversification that is fine. We can start building the future in city networks - like the Kogge network - today, if we want to.
We should refuse to just accept European decline as a given, but we should also realize that this means that we need to try for real, radical change.
Thanks for reading,
Nicklas
Still lots to do here though. See https://mayorsofeurope.eu/ - for example only 1/6 mayors in Europe is female. That has to change.
See Danica Dillion, Curtis Puryear, Longjiao Li, Andre Chiquito, Kurt Gray, National politics ignites more talk of morality and power than local politics, PNAS Nexus, Volume 3, Issue 9, September 2024, pgae345, https://doi.org/10.1093/pnasnexus/pgae345
Ibid.
See https://www.carnegie.org/news/articles/local-government-navigates-negative-impact-of-political-polarization-better-than-federal-government-according-to-new-civicpulsecarnegie-survey/
See Anzia, S.F., 2021. Party and ideology in American local government: An appraisal. Annual Review of Political Science, 24(1), pp.133-150.
There is a fascinating document for those who really want to dig into this here - the 1427 Catasto from Florence (one of the few preserved, the ones from Venice are mostly destroyed, I understand). See Eckstein, N.A., 2006. “Addressing Wealth in Renaissance Florence: Some New Soundings from the Catasto of 1427”. Journal of urban history, 32(5), pp.711-728 and the review of the 1427 database here: MIDURA, R. (2022). [Review of Online Catasto of 1427. Database, by D. Herlihy, C. Klapisch-Zuber, R. B. Litchfield, & A. Molho]. Renaissance and Reformation / Renaissance et Réforme, 45(4), 201–204. https://www.jstor.org/stable/27245419
See De Vries, J., 2013. European Urbanization, 1500-1800. Routledge and Cipolla, C.M., 2004. Before the industrial revolution: European society and economy 1000-1700. Routledge.
See for some discussion here: Strano, E. and Sood, V., 2016. Rich and poor cities in Europe. An urban scaling approach to mapping the European economic transition. PloS one, 11(8), p.e0159465.
I cannot stress enough how much one can learn from the book Vogel, E.F., 2011. Deng Xiaoping and the transformation of China. Harvard University Press.
See https://www.framinghamheartstudy.org/
https://oecd-opsi.org/innovations/virtual-twin-singapore/
See Lyons, J.T. and Göçmen, T., 2021. Applied machine learning techniques for performance analysis in large wind farms. Energies, 14(13), p.3756.
https://www.ukbiobank.ac.uk/
Is this simple? No. But is it worth trying new tools to create urban safety? I think so. See eg Henson, B., 2025. Introduction to Crime Prevention. In Understanding Crime Prevention (pp. 3-26). Routledge.
https://www.bast.de/EN/Traffic_Engineering/Subjects/V5-digital-test-bed.html
See https://www.e-resident.gov.ee/
How on earth do you argue that “Such cooperation shall not undermine the internal market or economic, social and territorial cohesion. It shall not constitute a barrier to or discrimination in trade between Member States, nor shall it distort competition between them.”? Well, you could argue that in the long term this will strengthen the EU, the internal market and all member states.