Barcelona has boomed since the early 1990s, when preparations for the Olympic Games wrenched it into modernity, and today it remains well in the vanguard of other Spanish cities (with the possible exception of Madrid) in terms of prosperity, stability and cultural activity. It's a confident, progressive city, looking towards the rest of Europe for its inspiration and its innovations - the classic tourist images of Spain seem firmly out of place in Barcelona's bustling central boulevards and stylish modern streets. And style is what brings many visitors here, attracted by enthusiastic newspaper and magazine articles which make much of the outrageous architecture, user-friendly city design, agreeable climate and frenetic nightlife. Even the medieval Gothic quarter and its once-notorious red-light area have been swept up by the citywide renovation programme, which is still running at full tilt. As the new millennium starts Barcelona has continued to blossom from provincial city to putative European capital.

It's no accident that the city's current development outstrips most of the rest of Spain. With the return to democracy following the death of Franco, the various Spanish regions were allowed to consolidate their cultural identities through varying degrees of political control over their own affairs. Catalunya (Catalonia in English), of which Barcelona is the capital, has an historical identity going back as far as the ninth century, when the first independent County of Barcelona was established, and through the long period of domination by Castile, and even during the Franco dictatorship when a policy of cultural suppression was pursued, it proved impossible to stifle Catalan ethnicity. In Barcelona itself, this regionalism is complemented by a strong socialist tradition - the city was a bastion of the Republican cause during the Civil War, holding out against Franco until January 1939, and remained the scene of protests and demonstrations throughout the dictatorship.

As a result of this urge to retain its own identity, Barcelona has long had the reputation of being at the forefront of Spanish political activism and of radical design and architecture, but these cultural distinctions are rapidly becoming secondary to the city's position as one of the most dynamic and prosperous commercial centres in the country. As the money (much of it from the EU) continues to pour in, the economic transformation of a city deprived under Franco, continues at a remarkable pace: entire districts, from the harbour to the suburbs, have been replanned and rebuilt; historic buildings and museums have been given face-lifts; and roads and communications have been upgraded. In part, this progress is due to the huge psychological shove that the granting of the 1992 Olympics gave to Barcelona. When the Games had finished, the city was left with an entirely new harbour development containing the futuristic Olympic Village. And along with a construction programme that touched every corner of the city, went the indisputable knowledge that these had been Barcelona's Olympics, and not Spain's - an important distinction to the Catalan people, who, bolstered by the gradual integration of immigrants from other parts of Spain, endow the city with a character distinct from Spain's other regional capitals.

Since 1992, the developments have continued unabated; indeed Barcelona's drive for self-improvement and self-promotion seems to know no bounds. The commercial port continues to expand, and is now dominated by a futuristic World Trade Center set in the central harbour, while the airport is given a new runway and the city anxiously awaits the arrival of a high-speed train (AVE) line. There's a pride in the city which is expressed in a remarkable cultural energy, seen most perfectly in the glorious modernista (Art Nouveau) architecture that studs the city's streets and avenues. Antoni Gaudí is the most famous of those who have left their mark on Barcelona in this way: his Sagrada Família church is rightly revered, but just as fascinating are the (literally) fantastic houses and apartment buildings that he and his contemporaries designed. In art , too, the city boasts a stupendous legacy, from important Romanesque and Gothic works to major galleries containing the life's work of the Catalan artists Joan Miró and Antoni Tàpies, and - perhaps the greatest draw of all - a representative collection of the work of Pablo Picasso.

For all its go-ahead feel, though, Barcelona does still have its problems . A traditionally homogeneous society, accustomed to Spanish emigration, has been changed forever by the arrival of large numbers of immigrants from Asia, Africa and South America, many of whom enter illegally, looking to grab a share of the city's economic success. Partly as a consequence of this, the petty crime rate has rocketed, and tourists must take precautions when visiting the city, and despite the work done on the infrastructure, there is still a lot to do. There's also a growing gap between rich and poor, and one repercussion of the gentrification of poorer districts is that the original dwellers are being priced out - real estate speculation has led to a curious situation wherein the city, in the midst of an acute housing crisis, has tens of thousands of empty apartments which are not on the market.

There's a problem, too, in Barcelona's relationship with the rest of Catalunya. More than half the region's inhabitants live in the city and its surroundings, creating an uneasy imbalance that becomes clear if you travel through the depopulated inland and mountain areas, and which is most obvious in the political sphere - Catalunya is conservative and regionalist, Barcelona is socialist and nationalist. At times the city has prospered at the expense of the rest of Catalunya, and though there are pockets of wealth and interest - on the coast, in the ski resorts - there's a nagging feeling that Barcelona is very much the main event. It's not a feeling that holds firm if you do make the effort to spend time in other parts of the region, but it is indicative of the fact that Barcelona, boasting loudly of its European character and city style, is in danger of forgetting its wider roots and becoming self-absorbed and inward-looking.