The challenges today for local economic development and employment creation are putting pressure into traditional models of economic growth and the way policy makers and practitioners have seen development pathways for our countries and regions. New models are emerging and new ways of thinking are now directed to the meaning of 'territoriality' as an approach that takes into account the different geographical levels of modern development: national, regional and local. This territorial 'trilogy' calls for the integration of strategies to foster development in a sustained way and taking into account the social, economic and environmental factors integrated into local development. Today more than ever we have to focus on the interaction of these factors and the key issues they translate into: job creation, employability, entrepreneurship, inclusive growth, fostering education policy for qualifications and skill rich ecosystems.The combination of/or coordination across different territorial levels provides a more sophisticated approach for developing territoriality-proof policies that can reach the final delivery and implementation of strategies and initiatives. Improved coordination and policy coherence between supranational, national, regional and local governments will yield economic and social dividends in the form of better designed and more effective strategies that combat the immediate effects of high unemployment, mitigation of future economic shocks and building accountable, competent institutions that can meet the growing set of challenges.The OECD LEED Programme in cooperation with the Polish Ministry of Regional Development has prepared this paper to analyse in deep how the territorial approach (local, regional and national) is an effective and needed mechanism for development, employment, education and poverty reduction which are core issues of European and OECD countries. In particular the paper argues for stronger territorialisation of the European Social Fund as a vital tool in pursuing these goals through a more integrated territorial approach to create ownership at the local level and to foster a coordinated policy approach top-down and bottom-up.Through the examples and arguments presented in this working paper, the local level emerges as a key spatial dimension where economic development instruments apply. This does not mean that other levels from the national and the regional level are not involved or that they are minimised. On the contrary it means that the local level is gaining prominence as the place where people and firms operate, where economic and social activity happens, and therefore where policy makers and other key actors must pay particular attention.