Zagreb, Croatia -- The Factory is a noisy place. Inside, by 9:30 on a Tuesday night, trails of moisture slither down the paint-splattered walls and a fat belly of cigarette smoke hangs in the air. But as crowds of fashionably dressed young Croatians gather expectantly outside the drab, inconspicuous entrance, work could not be further from their minds. The Factory, one of Zagreb's trendiest nightspots, has even more to offer than bottled beer and ubiquitous techno music: it has become one of the city's most popular theaters.

As the cavernous auditorium fills for the evening show, the bar empties. People clamber over one another to grab the best seats, swigging beer and drawing on cigarettes as the lights go down. In a small space without a stage, marked by a low-hanging metal scaffold, Daska, a small theater company from the nearby town of Sisak, begins a performance of "Waiting for Bread."

"I can give you love and rhetoric, but not without blood," one of the codpiece-clad actors says in English with an emphatic mock-aristocratic accent. The play, a polyglot fairy tale with Beckettian overtones, seesaws between gleeful, childlike pageant and dark parable as the audience is showered with splintered ice, a metaphor for the fragments of an annihilated city.

As the show ends to exuberant applause, the Factory's technicians are already dismantling the set behind the beaming performers. Seconds after the metal scaffold disappears, a mass of bodies heaves to the club's beat, as if jumping around to drum 'n' bass were the natural ending to a night at the theater.

The merging of theater with urban culture that the Factory represents has recently surfaced in Croatia in unexpected ways. When a well-known cosmetics and hair products maker donated the props for "Touch," a play set in a beauty salon, at the I.T.D. Theater in Zagreb, the business's name and logo appeared more prominently on the playbill than the name of the play. And when Zagreb was the host of an annual theater critics' gathering, the 2000 International Theater Institute/Unesco Conference, earlier this year -- the first international event here since the new government came to power in February -- delegates needed only to flash their conference badges to travel the tram network free. When every ticket inspector in a capital city's transit system can recognize a badge from an esoteric theater critics' convention, one would think the cultural life of the city was in good hands.

Theater people here, even government officials, don't see quite so rosy a picture, however. For example, Antun Vucic, the Croatian Minister of Culture, said: "There are two kinds of lunatics. One who believes he is Napoleon and one who believes he can solve the problems of Croatian theater."

Although privately run theaters are beginning to emerge in Croatia, they barely survive on box-office receipts and limited sponsorships in a nation where the government still provides the bulk of cultural financing. Despite its 4 national theaters, more than 30 city-owned public theaters, 16 theater festivals and a prestigious academy of dramatic arts -- all state-subsidized -- there never seems to be enough money to go around.

Croatia remained largely peaceful during the second half of the 1990's, but the earlier Balkan wars left a mark on the nation's cultural life. Its once-lucrative $4 billion-a-year tourist industry and vibrant artistic scene -- almost destroyed through the mobilization of a large part of the male population, emigration and civil unrest -- have only recently shown signs of recovery.

Culture certainly seems a priority for the government of President Stipe Mesic, who was elected in February to succeed Franjo Tudjman. "The political vocabulary has changed completely since this government came to power," said Sanja Nikcevic, a theater critic and the Croatian bureau director of the International Theater Institute (a nonprofit organization that encourages mutual exchanges among theaters around the world). "Before, the interests of the nation came first. Now, with democracy and openness, culture is very highly ranked."

Significantly, state cultural spending rose by 13 percent this year. "But the amount of money doesn't mean anything if the new government and the Ministry of Culture do not impose the right criteria for distributing it," Ms. Nikcevic said.

A three-hour National Theater production of Tomislav Bakaric's "Hasanaga," an epic play based on a 15th-century folk legend about a self-doubting Turkish commander sent to quash an uprising of indigenous rebels, certainly feels three hours long. With its extravagant, cumbersome, opera-style scenery and mannered acting style, the performance seems frozen in the 1960's. Yet as the jewel in Croatia's cultural crown, the National Theater in Zagreb receives more money from the state than any other group. The production demonstrates the negative side of generous state subsidies: the same actors remain on the payroll for 30 years or more; administrative and technical staff members outnumber artistic personnel by three to one; and box-office earnings have little influence on programming.

"Unhappy actors find themselves playing in performances they don't want to be in and directors are forced to work with people on salary, without the possibility of auditioning actors or creating a cast of their own," said Lidija Zozoli, an editor at Vijenac, a theater journal in Zagreb.

In recent years, measures have been taken to rectify some of the most ossified aspects of Croatia's state-subsidized theater. Since 1990, the government has required that members of artistic ensembles no longer be treated as permanent employees but undergo re-election every two years. In reality, though, the edict may be respected more in theory than practice. "The National Theater actors re-audition every two years the way they are supposed to, but it's really just a formality," said Boris Senker, a Croatian playwright and theater critic. "I've never known anyone to fail an audition."

Ms. Nikcevic complains, "The government should decide what they really need -- programs or just institutions."

While it is too early to tell whether the new government will help Croatian theater shed some of its archaic habits, the state's entrenched loyalties threaten even the firmest intentions to establish an unbiased arts policy.

As Mr. Senker put it, "Theater managers are chosen not so much on the basis of competence as on the basis of their being acceptable to the ruling party."

This atmosphere of politics as usual is not the only predictable aspect of the new democracy: theater here seems to be floundering for subjects and causes, a common enough predicament among nations with former totalitarian regimes.

But when compared to the vibrant theatrical scene of a few years ago, it is surprising. Then, despite the physical damage to the National Theaters in Zagreb and the eastern town of Osijek by Serbian bombs, the destruction seemed to lead to a vigorous theater. Throughout the fighting, the theaters stayed open, presenting a mixture of comedies, classic plays and operettas as a way of helping people forget what was going on around them. The buildings also provided shelter from the bombs.

Milena Dundov, a puppeteer from the southern coastal town of Zadar, remembered running through the streets to the Puppet Theater, the city's only theater, to escape an air attack. "We felt safe under the theater roof," she said. "It was like the magic of the theater was protecting us."

Even the censorship and political turmoil of the years preceding independence gave Croatian theater artists a passion for anarchy. When an adaptation of the Faust legend by the Croatian playwright Slobodan Snajder, set in the days of Ustase domination, visited Zagreb's National Theater on tour in 1982, the play caused an uproar among audiences, who thought it heretical. (In World War II, the nationalist Ustase movement was permitted by the Nazi occupation to put Serbs, Jews and Gypsies into concentration camps and kill them. Most historians agree that at least 500,000 civilians died in the Ustase camps.) The play was shown abroad to great acclaim but never incorporated into the Croatian repertory.

This year's production of Goethe's version of the Faust legend, currently in repertory at Zagreb's National Theater, offers a comparison to Mr. Snajder's politically volatile retelling. What critics found to be a lackluster production elicited more snores than raised eyebrows among audiences when it opened in February.

"Through the 1970's and 80's, the theater was always opposed to the government," Mr. Senker said. "But since the election, the theater has lost its energy. There's nothing to protest against."

These days, the freedom of expression and openness to Western influences has led to a different sort of protest play in Croatia. If light comedies and operettas dominated the theaters during the war, an in-your-face display of sex and violence occupies some of Zagreb's stages today, alongside pessimistic plays by Croatia's younger generation of playwrights like Mislav Brumec and Asja Srnec Todorovic.

Foreign imports, including Patrick Marber's "Closer," Steven Berkoff's "East" and Paula Vogel's "How I Learned to Drive," answer a need among the new wave of private theater companies to sell tickets to a young audience with a new Hollywood-inspired taste for sex, violence and obscene language. Portraying social, emotional or political warfare through metaphors of crime and destruction, this genre of play is receiving the exposure it would never have had during the recent war.

While some elements in the Croatian theater seem to be too literal in striving to meet President Mesic's goal of making Croatia cosmopolitan, no one is rushing to forge an artistic reconciliation between the country and its nearest neighbor, Serbia.

"When the day comes," Mr. Senker said, "that some Croatian theater, without any political pressure or mental reservations, once again includes in its repertory some old or new Serbian drama text, it will be an authentic sign that peace really has returned to this part of the world."

In light of plans to re-open the rail link between Croatia and Bosnia, perhaps cultural links with Serbia will be re-established in the not-too-distant future.

Mr. Senker has his doubts. "That day is not yet on the horizon," he said.

Copyright The New York Times Ltd