A wealth of Prague's delights

Bargain basement tour or blow-out? In ultra-cheap Prague you can have either.

This is a city where a good meal with wine can cost less than a fiver, and a cheap hotel not much more. You can settle for a weekend spending next to nothing; or seize the opportunity to large it in style. No contest: for a romantic break, spouse and I chose the latter.

Prague was chilly under a heavy grey sky. At the Palace Hotel, however, the cosy interior glowed with warmth. This glorious Art Nouveau building has stood in the old town since 1906, a stone's throw from Wenceslas Square. Worth, we agreed, every (considerable) Czech koruna.

Yet getting through our spending money was clearly not going to be easy. The Czech Republic's tourist sector has grown in unpredictable ways. If the Palace is one of the few world-class hotels in the city, the shortage of good restaurants is even more noticeable. A Martian landing in Prague might reasonably assume that pizzeria was Czech for restaurant. (And with its customary layer of winter snow, Prague's weather, you might say, is "deep-pan crisp and even".)

So, although there are international chain stores, cheap CDs and some good Bohemian crystal on offer, Prague's wholesale embrace of westernisation has made shopping for local items - in my case, a winter hat - difficult. At the Klobouky hatters on Wenceslas Square, a substantial lady with a fag hanging from her mouth dumped a pair of mink hats in front of me, and then scowled when I politely declined them. And at the Kotva department store a succession of bored young assistants rolled their eyes heavenwards and hooked thumbs over their shoulders, directing me to a tatty display of homburgs and top hats. Behind the façade of tourist-friendly Prague, some Soviet-style habits still die hard.

Still, there was always the city itself, now sparkling in the winter sun, the trees on castle hill across the river coated with a sheen of frost; the glorious baroque extravagance of the Old Square and the Charles Bridge. Everywhere you turn in Prague there's an architectural feast for the eyes; Romanesque, Gothic, Renaissance, Baroque. The simplest walk around town makes you feel like pounding your chest with pleasure.

Or at the very least, slipping something cheering down your neck. Clever little kiosks sell svarené vino, mulled wine, for 30p a cup, and hot dogs made of spicy, sizzling wurst. Amazing how the cold and exercise work off food and drink. After a long day's walk through the cobbled lanes of the old town, we were on our third or fourth hot dog each and our combined svarené vino consumption was approaching double figures.

Out then, to the State Opera House, an elegant 19th century building. The Turn of the Screw was marvellously atmospheric, but even here it was hard to part with much dosh. The best seats in the house cost a mere £18; champagne in the interval was a quid a glass. We had better luck at the Palace Hotel's Club Gourmet restaurant. In a darkly sumptuous Art Nouveau interior, with a tuxedoed pianist tinkling Gershwin and Porter, we got stuck into a menu of warm goat's cheese and salad, and succulent grilled duckling. Our major extravagance was a bottle of local claret, but still the whole meal only came to around 60 quid.

On a sunny Sunday morning church bells were pealing as we crossed the River Vltava and made our way up to the hrad (castle) on the hill. Here the changing of the guards offers some of the best free entertainment in the city. The soldiers, with their vast fur hats and swinging gaits, look remarkably like the ones who guard the castle in the Wizard of Oz. Their anthem is not a military march but a tune written by a local rock singer and friend of President Havel, and lends the proceedings an innocent, happy-go-lucky air.

Back across the river I found the hat that had so far eluded me at a street stall: beautiful black rabbit's fur for a tenner. The stall holder refused to bargain (even upwards). So later that evening, flushed with cash and success, we slipped out of the cosseted charm of the Palace Hotel to a local joint called U Jindrisske veze. Here, old boys with dogs rubbed shoulders with students, eating together at long communal tables groaning with food. Pickled sausages with mustard; dumplings; pork chops wrapped in pancakes; two bottles of wine, coffee and a glass of eye-watering Becherovka liqueur later we were sated. Total, £10 for two.

We made our way back to the hotel feeling like wine casks on legs. The caped doorman welcomed us in with a flourish, and there was a nightcap of svarené vino waiting in the bar. This was three times the kiosk price, but no matter. Perhaps that's the best thing about Prague: no matter how much or how little you spend, you still feel like a millionaire.

Paul Mansfield travelled to Prague with Elegant Resorts (0870 33 33 370) which offers three-night breaks at The Hotel Palace Praha for £505pp B&B in February, including return flights with British Airways and private car transfers.