Balanced and polycentric development of the European territory is a key challenge of territorial development and cohesion policy. ESPON has already paid considerable attention to the geographical spread of urban and economic activity throughout the European territory. This includes among else the applied research projects on cities and urban agglomerations, the roles of cities in territorial development, secondary growth poles, and development potentials in different types of areas. The results and evidence from these projects needs to be complemented with further research and additional evidence on the functional roles of small and medium-sized towns and how they contribute to the development of their territorial context and bring added value to the Europe 2020 strategy for smart, sustainable and inclusive growth.