Berlin Babylon: Set for a sequel

It's where Marlene Dietrich danced in the Blue Angel, Fritz Lang created his Metropolis – and Joseph Goebbels filmed the Nazis' propaganda. Now Germany's long-neglected film studios are making an astonishing comeback. Tony Paterson reports

The buildings are still there: the cavernous wooden-roofed studio where a 29-year-old Marlene Dietrich donned a silver top hat and suspenders and became a star overnight, and the brick blockhouse from which Hitler's propaganda minister, Joseph Goebbels, began his cinematic tirade against the Jews.

Babelsberg, the German film studios that in the 1920s and early '30s won international fame as the Teutonic Hollywood, endured the trials of Nazi rule, the Second World War and Communism. But they emerged almost physically unscathed when the Berlin Wall fell in 1989.

Yet for more than a decade and a half since, the complex of studio buildings, outdoor sets and warehouses containing the world's largest collection of film props, seemed to hold little more than memories of Nazi brutality, Communist banality and a brief flash of inter-war genius.

Hollywood directors were slow to take up the chances offered by the post-Communist owners and even as recently as three years ago there were fears that Babelsberg would dispense with a 95-year-old tradition of big-screen film-making in favour of television production.

Not any more – this year Babelsberg has achieved what, by any standards, amounts to an astonishing comeback. By the end of 2007 the studios will have produced 11 films in all as well as hosting two semi-permanent daily television soap operas.

Two of this year's films are big-budget Hollywood productions that are being shot simultaneously: Valkyrie – about the 1944 plot to kill Hitler, starring the Church of Scientology member Tom Cruise, and Speed Racer by the Wachowski brothers.

The sudden turnaround in the studios' fortunes is a triumph for Carl Woebcken, Babelsberg' new chief executive and his associate Christoph Fisser. Three years ago they bought the outfit for a single euro from Vivendi Universal, a Franco-American conglomerate that took control in 1992. Vivendi had been unable to stop losses which totalled around €1m a year despite its investment of more than €500m.

Babelsberg's comeback began a year later in 2005. Having paid off the studios' debts, Woebcken and Fisser began edging the studios towards profit with such films as Aeon Flux, V for Vendetta and Black Book. However hopes were dashed, albeit briefly, in 2006 when the German government decided to postpone for a year a plan to introduce subsidies covering up to 20 per cent of production costs.

This year, with subsidies granted, Babelsberg is hoping to be in the black for the first time since it emerged from Communist rule in 1989. Its directors are expecting revenue to top €100m in 2007 – compared with €16.4m last year – which would amount to a pre-tax profit of €5m.

Woebcken is taken aback by the sudden success; "Despite doubling our studio capacity in 2005, we are this year having to rent extra studio space in order to cope with enormous demand from international film productions," he said. The studios can now film three large-scale productions simultaneously and have installed Hollywood-standard lighting and sound insulation.

With the films have come the stars. Not only Cruise, but his former wife Nicole Kidman, who is starring in the adaptation of Bernhard Schlink's novel The Reader while Matt Damon, Angelina Jolie and John Cusack have all been seen in nearby Berlin. "The glamour factor makes the buzz around the city that much higher," Woebcken says.

But, despite Babelsberg's rash of productions, its comeback is a far cry from the days when the studio counted as one of the world's largest and was pumping out almost 600 films a year. It was the cradle of the 1920s German Expressionist film movement pioneered by Fritz Lang. The hangar-like studio which Lang used to make his 1927 Metropolis survives wholly intact and is still being used to make films, as is the next-door building, nowadays called "Marlene Dietrich Hall". It was there that she made her debut as an international star in Josef von Sternberg's The Blue Angel – a film based on a novel by Heinrich Mann about a teacher who becomes besotted by Lola, a night-club singer – Dietrich.

The Blue Angel was one of the first films produced at Babelsberg in German and in English and was a runaway international success. Like Metropolis, the film is one of a handful of cinematic trophies recalling the studios' brief golden era. Disgusted by the Nazis, who came to power in 1933, Dietrich fled to the US. Babelsberg soon became the centre of Hitler's propaganda machine. Many would argue that the studio has been trying to live down its stained reputation since.

Goebbels was quick to set up an office in the squat red-brick building opposite the main entrance that is nowadays euphemistically referred to as "House 3." With its granite door posts and pseudo-medieval porch lights favoured by Nazi-era architects, it is still not difficult to imagine Goebbels' Mercedes rolling up and disgorging heel-klicking party officials.

The Nazis made extensive use of the studios, starting with the brilliantly executed yet shamefacedly pro-party films of the young Leni Riefenstahl. She is remembered most for Triumph of the Will her fawning portrait of Hitler at a Nuremberg rally (the film is still banned in Germany) and Olympia, her documentary on the 1936 Berlin Olympics.

Babelsberg was also used by Goebbels as a launching pad for the Nazis' anti-Semitic screen campaign. Jews were portrayed as subjects worthy of abject hatred in the 1940 production, The Jew Süss and the more vitriolic The Eternal Jew which critics at the time described as a "symphony of disgust and horror". The film shows footage of starving Jewish men and women in a Nazi-occupied ghetto in Poland and compares them to packs of sewer rats.

At the same time, the regime was churning out scores of light-hearted, apolitical productions designed to keep the German masses entertained and distracted from the grim realities of the time. With the help of actresses like the Swedish Zarah Leander and her German counterpart Heinz Rühmann, the Nazis produced more than 1,200 films – most of which were not direct propaganda for the regime.

When Germany's defeat to the Allies became certain, Goebbels began making so-called Durchhalte- Filme which translates roughly as "stand fast films". Undoubtedly, the most extraordinary of these was the 1944/45 production Kolberg which tells the story of an ordinary German town surrounded by French Napolenonic troops but which refuses point-blank to surrender to the invaders.

Despite the fact that the war was by then already lost for the Germans, Goebbels drafted in 187,000 German troops to act as soldiers in the film. Kolberg was one of the most expensive films made at Babelsberg. It premiered in Berlin in January 1945 on the anniversary of the Nazi's "seizure of power" and only four months before the end of the regime. A copy was dropped by parachute on the Nazi-occupied French port of La Rochelle in an attempt to provide moral support to troops under siege from the Allies.

Located in the Soviet zone of occupied Germany, Babelsberg fell under Communist control after the Second World War. While the East Berlin regime was devoting its energies to shooting East Germans trying to escape to the West, Babelsberg's directors spent time making politically correct films about the awful plight of Red Indians in paleface-run America.

In one of the studios' warehouses stuffed with film props dating back more than half a century, there are dozens of photographs of the so-called "Indians films". They reveal that, as East Germany was so flat, Babelsberg's directors had to travel to the Wild West surrogate of Yugoslavia to shoot the films. There they relied on a Serbian sports champion called Goiko Mikic to play the role of lead Indian.

It is understandable that Babelsberg's new management likes to think of the studios' comeback as a return to the era of Marlene Dietrich and Fritz Lang. "We are more like we were in the golden Twenties," Woebcken recently told Germany's Der Spiegel magazine.

Yet, in many respects, Babelsberg is simply a mirror of Germany as a whole – a place that, whether it likes it or not, will remain haunted by the Nazi era for years to come: The studios' main outdoor film set underlines the point: it is a grim mock-up of a street of shabby fin de siecle buildings built for The Pianist – the award-winning film about the Warsaw ghetto that was set up during the Nazi occupation of Poland.

Ironically, the Babelsberg film that has attracted the most publicity and controversy since the studios renaissance is Cruise's Valkyrie. In the film, Cruise plays Claus Schenk von Stauffenberg, the German officer who made an abortive attempt to assassinate Hitler at his Prussian headquarters in 1944. Von Stauffenberg, who was shot dead hours after the suitcase bomb he planted failed to kill the Nazi leader, is one of Germany's few Second World War resistance heroes.

Babelsberg and the German film industry may have welcomed the fact that such a big-name Hollywood actor has decided to play the part. However, the Defence Ministry and large sections of public opinion aren't much taken with the idea of a member of Scientology – which is regarded as a dubious quasi -religious sect – playing a German national hero. Earlier this year the Defence Ministry protested by banning Cruise from shooting on its premises.

The ban has since been revoked. However, it is unlikely to be the last Second World War controversy that Babelsberg faces as it forges ahead as Germany's Hollywood reborn.