There are not many cities which have been bashed about by history as much as Berlin -- and it shows. Shrapnel-scarred buildings and gaping holes in the cityscape from the Second World War contrast with 60s Flash-Gordon style communist boulevards. But it is the area round the Palast der Republik, or the Palace of the Republic, in the center of the city, which is Berlin's most historically significant and most interesting site. It also happens to be a complete mess.

Originally used as a political and cultural venue by the East German state, the rusting steel and glass structure today looks more like a vandalized multistory car-park than the former GDR parliament building. Admittedly the parliament's role in a one-party state was slightly limited, but until the fall of the Wall in 1989 this building was nevertheless the glitzy center of a not-so-glitzy regime.

What to do with the Palast has -- in the decade and a half it has stood empty since German reunification -- managed to divide the city almost as effectively as the Wall once did. If you're young, hip, and culturally savvy, then the odds are, you'll be a bit of a fan of the Palast's retro-chic 70s charm. If, on the other hand, you're more business-minded, respectably-clothed and with a yen for pretty buildings, you'll probably be quite into the idea of ripping the thing down and rebuilding the enormous Baroque castle, or Berliner Schloss, which once stood here. Incredibly enough, considering the enormous cost involved, this is looking like an increasingly realistic possibility.

In 2002 the German government agreed to demolish the Palast, which was constructed in 1974, and build a structure with the original dimensions of the old Baroque castle. In typically consensual German style, the decision, which took 12 years to make, was not exactly a speedy one. And even now, the debate still rages as to what this new-style castle will actually look like.

Castles in the Sky

The driving force behind plans to rebuild the Schloss, which would contain a museum complex and a luxury hotel, is the Hamburg business-man Wilhelm von Boddien. He proposes to meticulously reconstruct the Baroque building which was bombed in the war and then torn down in 1950 in a fit of ideological pique by the East German leader Walter Ulbricht. Most people agree that demolishing the building, rather than renovating it, was hardly the most culturally sensitive move ever. But should we really try to recreate the past by rebuilding it?

"The world is full of rebuilt buildings," Wilhelm von Boddien said, standing next to a model of pre-war Berlin in his rather swanky Schloss showroom round the corner from the Palast. "The Gothic cathedral in Orleans was demolished and completely rebuilt hundreds of years later under Napoleon. Now no one even knows today that it is a reconstruction."

And although overbearing Prussian monumentalism isn't to everybody's taste, von Boddien's models and simulations certainly look impressive. But at a cost. Demolishing the Palast alone will cost an estimated €20 million -- a shoddy job could well bring the neighboring cathedral down with it -- while the Schloss itself would cost an estimated €670 million. Can Germany justify building a fantastically expensive castle at a time when unemployment figures are hovering just short of 5 million and people are taking to the streets to protest against benefit cuts?

"It's a good investment," says von Boddien. "On the one hand it will be a massive labor program which will employ thousands of people. On the other, it's a project which will provide hope and inspiration in bad times." And whatever critics have to say about von Boddien -- and they say a lot -- his hopeful optimism, a rare thing in Germany, can't be faulted. He plans to fund the reconstruction through a plausible sounding mixture of public-private partnership and voluntary donations, €10 million of which he has already collected.

Sanitizing History

Hearing von Boddien talk it is hard not to be convinced by his buoyant can-do attitude. But, however good a salesman he may be, not everyone is convinced. "We think it is a rather unrealistic plan which is like wanting to drive a Porche but not wanting to pay for it," says Philip Misselwitz, an architect who has helped organize various cultural events in the decaying Palast. He says that it is ridiculous to tear down the building to leave a plot of land which could well stand empty for decades and describes the demolition of the Palast as "cultural revenge."

In July Misselwitz curated an exhibition in the Palast in which 19 architects presented proposals of what to do with the site. "To clean the center of Berlin of buildings and legacies that we may not approve of is not a good thing," he said during a tour of his exhibition. "We would equally argue that buildings from the Nazi period be left behind, because it is important that history is not represented in a clean perfect sort of way. Visitors come to Berlin to see these fractures and the collisions of buildings of different ideologies."

Climb Every Mountain

The latest cultural event which Misselwitz and his colleagues are currently showing in the Palast is the rather nutty "der Berg," or the "Mountain." The entire building is turned into an experimental art installation which allows visitors to explore the structure as if they were scaling a mountain. Alpine scenery is shown on a screen before the group is tied together with a rope and embarks on an expedition through the building. Urban life as a mountainous struggle? Loss of control in the GDR? It's not quite clear what the whole thing symbolizes, but whatever it means, it is certainly creative.

Previous equally eccentric shows have included flooding the whole building with water and paddling round the place in a canoe. And in July, Frank Castorf, one of Germany's most influential theater directors, staged his own version of the 1929 Alfred Döblin novel "Berlin Alexanderplatz." As is usual with Castorf's productions, the play was five hours long, involved plenty of naked people and sold out instantly -- mainly because Berliners love any opportunity of seeing the inside of the iconic building. The nudity probably didn't do any harm either.

Talking to members of the audience during the (well-earned) interval, it was clear that the Palast is well loved in Berlin. Tearing it down was described as "a shame" or "sad" or even "ridiculous." But despite protests, the building's demolition is scheduled to go ahead at the end of the year.