Once noted only as the capital of laughable pop music, Stockholm is the unlikely pretender to Next Big Thing status, says Oliver Bennett
Every so often, the finger of fashionable fate points towards a city and decides - with the benefit of a little grass-roots activity and a lot of public relations - that it shall be deemed Euro-hip and happening. Barcelona, Glasgow, Antwerp and Dublin have all had their moments in the limelight, while last year the Icelandic capital Reykjavik managed, against the odds, to romp home in pole position. Meanwhile, we have tried to argue London's case with all things new Brit.

But it is now the turn of that throbbing Nordic metropolis Stockholm, across the cold grey North Sea in Sweden. From being a bit of an unknown quantity, known for gloomy saunas, au pairs, cold weather and expensive beer, Stockholm has become a vibrant player. "Five years ago people complained that there was nowhere to go," says Keith Foster, an Englishman who is the editor of four-years-old listings newspaper N&D and host of an English- language chat show on Stockholm International Radio. "Now there are so many cafes and restaurants people don't understand how a city this small - with a population of only one and a quarter million - can sustain them. The whole atmosphere is on the up, there is a real spirit in the air."

There are various parts to this Scandie success story. Stockholm has lately become renowned for its music scene, with indie acts like the Cardigans, the Wannadies and Idha, plus chart acts like Robyn and Ace of Bass (groovy Swedes will disavow the latter); and it has a big dance music scene, with names like Antiloop, E-Type, Cari Lekebusch and Seba in the mix. An increasing presence of Swedish video promos on MTV has upped visibility overseas, and next year, Stockholm is to be the European City of Culture.

Why the renaissance? The country is economically weaker than ever, with more unemployment and less welfare than in many people's living memory. "We have even been talking about a crisis, though relative to other countries Sweden is still strong," says Christina Sollenberg Britton, of the annual magazine Stockholm New, which serves as a words-and-pictures showcase of the revitalised city. "But it's absolutely true that as a city Stockholm is thriving. Foreigners are often surprised how confident aspects of Stockholm life are, such as the night life and the design. And it's a small and comprehensive city, one that is easy to get involved in". Ironically, the current vibrancy of Stockholm may be partly due to its recession. "After the unemployment of the early Nineties, people started small businesses, often on the service side," says Foster. "People often have two or three entrepreneurial things going on."

Britton also thinks that the Swedes have become more outward-looking. "Stockholmers are extremely curious about what is going on in other countries and are very trend-conscious," she says. "They probably know as much about restaurants in London as Londoners do. In the past we've had a drain of creative people to London or Paris; now they tend to stay here." And many Europeans have had their Swedish consciousness raised by a visit to Ikea, a bunfight around a Face cosmetics counter or a shot of the arty spirit, Absolut Vodka.

There is also a food renaissance in Stockholm, just as there has been in London. "There is a new wave of restaurants run by people in their 30s who use the Swedish tradition alongside other influences," says Britton, whose magazine recently did a feature about cooking with elk. This eating and drinking boom has benefited from a loosening of the puritanical legislation against booze - a factor which has previously kept thirsty Brits away.

Ebba Adielsson, of the style and culture magazine Nojesguiden, says the boom is noticeable on the street. "In Stockholm people are very quick on trends. There is a very strong emphasis on looking right, whatever style they choose, and there's a lot happening." The Swedish thirst for trends is helped, she says, by the fact that Swedes are great travellers. "Everywhere you go you'll find one." The difference is that they now return. "I used to want to move to New York or Paris, but now I really want to stay here," she says. And while Stockholm may still look to London for influences, "Europe is now looking back at us."

That much is true of interiors and lifestyle magazine Wallpaper, which keeps an eye on Stockholm trends. "In the past year Sweden seems to have boomed, particularly on the design side," says Wallpaper's Toni Spencer. "There has been very interesting work from Stockholm at the Cologne and Milan furniture fairs".

Swedish design has always been strong, if slightly austere. But Stefan Ytterborn, a Stockholm-based designer in his thirties who has worked for IKEA, says Stockholm's design fraternity, while proud of the past, is becoming more innovative. "Stockholm is rooted in Scandinavia philosophically and socially, but the new generation looks for markets elsewhere," he says. "And in the Nineties there has been a spark of creativity which has exploded." Also, says Ytterborn, designers elsewhere in Europe started to look again at Scandinavian modernism. And yet, says Ytterborn, the Swedes could still lighten up. "I think maybe we need to become more playful. Though our pragmatic boringness can be a good thing, perhaps we might become more lively."

Few other city dwellers would be prepared to queue outside trendy Soder district spots such as the The Spy Bar, Byblos, East and Sturehof, in skimpy glad rags in temperatures below freezing - especially when there's ample room inside. "It's a ruse to make them seem more popular," sighs a Swede, queuing. Soder also offers another novel concept: the antique shop-cum-cafe in The String Cafe, a cool place that sells modern antiques in the Fifties and Sixties kitsch-o-rama idiom alongside a fully-functioning coffee bar, "the sort of place where people sit for three hours with one drink and look at each other," as one Swede cynically put it. But what better way for young Stockholm to enjoy its moment in the sun?