From most angles, Trieste's expansive Piazza dell'Unità d'Italia is similar to other landmark squares in Italy: Baroque facades, leisurely cafégoers and ubiquitous flocks of pigeons. But turn your back to City Hall and Piazza dell'Unità opens directly onto the Adriatic Sea — it's the only major Italian square that sits on a coastline. The tangy sea vapors that permeate the place are a constant reminder of Trieste's past as a bustling port in the Habsburg empire of the 18th and 19th centuries. Happily, there's also a taste of its future in the air.

Bordering Slovenia — and less than 450 km from Milan, Munich, Vienna, Zurich and Budapest — this northeast sliver of a city (pop. 220,000) is the gateway to a Europe expanding eastward. Already, port traffic has jumped from 3.3 million tons in 1998 to 5.4 million tons in 2002. That's not a big hill of beans in the global scheme of things — major international ports handle 15 times Trieste's tonnage — but it's pretty good for a boutique port catering to New Europe. "This is a moment of great hope," says Enrico Samer, managing director of Samer & Co., a shipping brokerage and insurance company founded here in 1919.

With the rise of the Iron Curtain after World War II, trade through Trieste dried up. Now, with E.U. enlargement and the promise of an explosion of consumer trade with China, Samer anticipates a dramatic new growth curve. "Trieste is the natural port that opens to the center of Europe," he says. But the city can only realize its potential if it makes good on long-overdue plans to expand its rail and highway connections.

Espresso baron Riccardo Illy, who has helped expand his Trieste family's coffee empire into 70 countries, is the most recognizable public official in the city, having served eight years as mayor and one as regional president for Friuli-Venezia Giulia. As a port city and border town, he says, Trieste is "all about diversity." There is a part of the city's identity that is certainly Italian, but a part is also "very much Mitteleuropa," says Illy. His own family illustrates the point: Illy's Hungarian grandfather founded the coffee company in 1933. "Now Trieste is ready to recover its natural hinterland. We are ready to bloom."

As one of three finalists (with Zaragoza and Thessaloniki) for the international Expo 2008, a world's fair of science, culture and technology, Trieste is vying to play on a bigger stage. If it gets the nod in December, there will be a surge of investment in the Old Port area. (Trieste has also become a capital of scientific research, with the growing stature of the International Center for Theoretical Physics and the International Center for Genetic Engineering and Biotechnology.) Roberto Drozina, a top manager of Trieste's industrial consortium, says the city must prove it can grow on its own, without state aid. "If Trieste were a stock, I'd buy some shares, maybe not a lot," he says. "But I think in four or five years, you'll start to see a real return."