Poor But Sexy; Germany's capital has fallen on hard economic times. Berliners like it that way.

Byline: Stefan Theil

Berlin's coolest new club, Kubik, hides behind an unmarked gate across from a crumbling house full of squatters in a derelict downtown lot on the river Spree. It's built entirely from refashioned industrial containers emanating a translucent green light. If they seem to be almost alive, it's no accident; thanks to an edgy software interface, they pulsate to DJ Bobby Frohlich's smooth post-techno beats. Amid the occasional sweet scent of cannabis, crowds of twentysomethings party until dawn. Sic transit Gloria Mundi . This weekend the cubes will be taken down and, poof, Kubik will be no more.

Quirky, creative and outrageously cheap--the cover charge is but a single euro, and beers cost [euro]2--Kubik is a perfect metaphor for the new Berlin. Remember all that post-unification speculation that the city, as a rising Germany's new capital, would metamorphose from a gritty outpost of the cold war into yet another homogenized, prosperous Eurotropolis? Forget it. The post-unity boom has fizzled--and most Berliners are perfectly happy about it.

Once again, their city is both Germany's undisputed lifestyle capital--and worst economic laggard. Judging by the bustling cafes, thriving art galleries and ubiquitous club scene (think Kubik, squared), you'd never know that Berlin suffers from nearly 20 percent unemployment. Per capita income is the lowest of any major German city. The economy has shrunk by 10 percent over the last decade, and the city's public debt, amounting to some [euro]80 billion, is more than that of Peru, Ecuador and Guatemala combined. Kubik is a symbol of all this, too. After all, the lot on which it stands, free of charge, has been on the market for nearly 15 years--prime downtown riverside real estate that can't find takers at one fifth what it would cost in London.

All this would be a cause of outrage in most world cities. Yet Berliners are at ease. Most were tickled when Klaus Wowereit, their popular partygoing mayor, dubbed the town "poor but sexy" late last year. A Social Democrat governing in coalition with the communists, the openly gay 52-year-old is a shoo-in to win Berlin's Sept. 17 election. His opponent, a sober-suited conservative, gets zero traction. Why? Because Wowi, as he's called, has managed to finesse the mess. Though nearly bankrupt, the city has kept budget cutbacks small enough to avoid angering voters. That's important, given that a whopping 41 percent of Berliners live off government subsidies--pensions, welfare, unemployment--and that the city's 200,000 civil servants make up one of the municipality's biggest voting blocs. And so what if that Kafkaesque bureaucracy is infamous for harassing entrepreneurs and stifling development? In this, Berlin reflects Germany's broader electoral and economic conundrum: how to reform when a growing majority of voters directly benefit from the old yet unsustainable order?

As most Berliners see it, Wowereit has done well merely by keeping things from getting worse. And in time, it may well be that Berlin's poor-but-sexy cachet turns out to be an advantage. Tourist numbers are up 22 ...