view of Lviv
A land time forgot: despite its population of 750,000 – on a par with Kraków – the city has maintained its quiet, idyllic charm © Michal Parusinski

Prague and Krakow, over-run by tourists, may soon find a competitor in Lviv. just across Ukraine’s border with Poland. The Unesco World Heritage site is gearing up to become the next hot destination for those in search of Habsburg splendour and good, cheap beer.

Among the cities of the former Austro-Hungarian Empire, Lviv stands apart. Central Europe’s steps toward the EU came with a flood of travellers seeking medieval town squares, history and café culture.

But in Lviv, time stood still. Despite its population of 750,000 – on a par with Kraków – the city has maintained its quiet, idyllic charm. Farmers’ markets appear each morning, trams run through the city’s cobbled streets and the faithful still fill its 104 churches of numerous denominations.

The city is now seeking to move into the big league, buoyed by its experience as a host city for the Euro 2012 football championship.

A new airport and high speed train to Ukraine’s capital Kiev make it more accessible to foreign tourists, 150,000 of whom came during the tournament.

Lviv has a long way to go. The city attracts 800,000 to 1m tourists a year compared with 8m to 9m for Krakow, says Oleksandr Kobzarev, head of the City Institute, a think-tank. Krakow has 20,000 beds, while Lviv has 6,000, or 10,000 including hostels, he adds.

City mayor Andriy Sadovyi hopes to increase tourist flows fivefold. “Not everyone is aware of the pearl of the east,” he wrote by email from China, where he represented Lviv at the Nanjing World Forum of Cultural and Historical Cities. His other plan, to turn Lviv into a regional outsourcing and IT hub, is starting to pay off. Investment has poured in, says Mr Kobzarev, and major employers are working with universities to turn out professionals fast enough to meet expansion plans.

Unlike other parts of Ukraine, Lviv has a thriving small and middle business sector, largely founded by people who worked in the west, earning capital and valuable experience, says Andriy Beyzyk, head of Western Ukrainian Management Consulting, which advises foreign investors. “People have more contact with western entrepreneurs, who find it more comfortable to work here [than in Eastern Ukraine],” he adds.

Just 60 kilometres from the EU border, Lviv is by far Ukraine’s most European city. Following centuries of Polish and Austrian rule, it did not fall under Russian domination until 1939, making its Soviet experience closer to that of the Baltics. While other cities saw their centres warped by communism and cleansed of foreign influence, Lviv was simply draped in a veil of greyness, with the occasional coat of tawdry paint.

But as the paint peels, revealing old signs in German, Polish and Yiddish, so too the city is rediscovering its multicultural past, and capitalising on famous former residents. Tourists drop in for an espresso and a public whipping at the Leopold von Sacher Masoch café, named after the 19th century journalist who gave his name to a perversion.

A plaque marks the home of Ludwig von Mises, a founder of the Austrian School of economics. Meanwhile, the mayor says, historically themed cafés such as the Jewish Pub and Masonic Lodge have mushroomed. Sadly, no signs adorn the building of the former Scottish Café, where members of Poland’s interwar Lwów School of Mathematics solved problems that would define today’s society, winning what were then expensive prizes – wine, a goose or a bottle of fine brandy.

They included Stefan Banach, father of modern functional analysis, and Stanislaw Ulam, who provided the maths behind the Manhattan Project and invented the Monte Carlo method used in genetics and option pricing.

Yet solving some problems may be beyond the city’s reach. Technical innovations and new infrastructure have eased pressure on the borders, but coming in by car remains a problem.

A study by the Batory Foundation, a Warsaw think-tank, found queues to leave Ukraine could last for 14 hours, with corruption weighing on inefficient organisation. “Ukrainian customs officers don’t see taking bribes as a shameful act, do not fear penalties, and usually themselves indicate who should be paid and how much,” it says.

Booming private trade is also adding to the lines. Estimates by Poland’s Central Statistical Office put the level of “private export” by Ukrainians at $500m compared with $2.4bn in official trade.

According to Mr Beyzyk, VAT refunds make Polish products more interesting.

Mr Sadovyi concedes corruption is a problem but says he is doing what he can to minimise it.

Lowering costs is another challenge. An overpriced hryvnia – the result of government policy ahead of upcoming parliamentary elections – and low economies of scale keep prices high, says Mr Kobzarev. Despite average monthly salaries of about $340, four times lower than in Krakow, overall expenses are similar.

Yet Mr Kobzarev insists the city remains a steal compared to Ukraine’s capital, Kiev, or even other regional centres, such as Dnepropetrovsk or Donetsk – tourism markets the city hopes to tap. “And compared to Moscow, it’s practically free,” he adds.

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