In Pula, an Italianate harbour town in northern Croatia, I found James Joyce seated on a terrace beside a ruined Roman arch. The bronze is outside Uliks (‘Ulysses’), a little Art Nouveau cafe in what was once the Berlitz school. The 22-year-old spent five months teaching English there to Austro-Hungarian naval officers in 1904–5, living with Nora Barnacle – with whom he had just eloped – in a tiny flat across the street.

The young couple found their stay tedious. In letters home Joyce dismissed Pula, at the southern tip of the Istrian peninsula, as a ‘back-of-God-speed place – a naval Siberia … swarming with faded uniforms’. Istria, with its vines and olive trees, was a ‘long boring place wedged into the Adriatic, peopled by ignorant Slavs who wear red caps and colossal breeches’. Yet before hastening 70 miles north to Trieste, he wrote several chapters of Stephen Hero – some of which he adapted into A Portrait of the Artist as a Young Man – in a cafe on Pula’s seafront. The novel’s serialisation began in 1914. One hundred years later, it strikes me that Stephen Dedalus’s vow not to serve home, fatherland or church but to fly past the nets of ‘nationality, language, religion’ has an uncanny resonance in today’s Croatia.

A nationalist witch-hunt in ‘all its perversities’ drove the novelist Dubravka Ugrešić out of the country in 1993. As Yugoslavia burned in the wars of 1991 to 1996, her astringent essays, which were collected in The Culture of Lies in 1998, skewered nationalism on all sides as ‘the ideology of the stupid’ and mocked President Franjo Tuđman as a war profiteer, manipulator and bad historian to boot. The ultra-nationalist, who died in 1999, wanted to erase the past, Ugrešić later told me:

to cut fifty years out of Yugoslav history, and glue 1991 – the ‘year of Croatian independence’ – to 1941, when Croatia was a Nazi puppet state … But why should you wipe out half your life because a bunch of criminals go to war to separate the country?

Reviled at home as ‘a whore, a witch and a traitor’, Ugrešić chose exile and cunning over silence. Abroad she wrote her novels, The Museum of Unconditional Surrender (1998) and The Ministry of Pain (2005), in a language she still referred to as Serbo-Croat. When I profiled her in The Guardian in 2008, she lived in Amsterdam and hated being seen as a Croatian writer. ‘You hear only of the fight between Croats and Serbs,’ she told me. ‘But people were deaf to the story of those who didn’t want to be either.’ Before gaining Dutch citizenship, she applied for a Croatian passport: under ‘ethnicity’ she wrote ‘none’.

Istria may not have charmed Joyce. But in Croatia the peninsula poses a cosmopolitan alternative to what Ugrešić scorns as ‘that ethno-nationalist stuff’. Under Venetian rule for centuries until 1797, ‘Croatia’s Tuscany’ signals its outlook with bilingual street signs. As a graffito once had it, ‘Kosovo the republic, Istria the continent’. Italian speakers are not the only minority whose rights are upheld. Almost 90 per cent of Croatia’s 4.3 million population are Roman Catholic. They are in the majority here too; yet when voters backed a Church-led move to block gay marriage in a constitutional referendum last December, Istrians proudly bucked the national trend.

‘Why are we such nice guys?’ asks Milan Rakovac, a local writer and veteran Yugoslav naval officer, debonair in a silk scarf and wide-brimmed hat. One answer he gives is the bloodshed of the Second World War, with its score-settling between partisans and fascists: ‘We had 400 small Srebrenicas.’ In the 1990s, Istria strove to stay out of the wars and became a haven for refugees. ‘Not one shell fell on Pula.’ As the unfinished business of sifting mass graves stokes grief and hatred in other parts of the country, Istria remains an oasis. One writer from eastern Croatia, near Vukovar, sighs, ‘Ah, Pula is paradise. We’re still in hell.’

The oval Roman amphitheatre rising above the harbour is one of the world’s biggest and finest. Pula now has the largest festival of writers in southeast Europe. It started at the war’s end in 1995, yet its fey appellation, Sa(n)jam Knjige (‘Book Fair(y)’), belies a robust credo. Its founding director, Magdalena Vodopija, sees the annual fair as a forum in which to speak freely, ‘in a manner typical of Pula’, in the teeth of a depressing ‘return to the lowest forms of conservatism, nationalism, xenophobia’.

At the festival in December I joined writers from across the former Yugoslavia in the House of Croatian Defenders. It was built in 1872, when Pula was the main port of the Austro-Hungarian navy, as a club for officers. Imperial pomp has since given way to peeling walls and a smoke-filled writers’ room impervious to EU law (Croatia joined last July). This year’s fair considered ‘Yugonostalgia’, a local version of ‘Ostalgie’ (the post-1989 term coined in former East Germany) which seems to entail a yen for kitsch ephemera, from Tito-era badges to retro songs at a ‘socialist dancing party’, rather than communism itself.

Harking back to Yugoslavia is a crimson rag to Croatian nationalists, who prefer their red flag chequered. Jugoslavija, moja dežela (‘Yugoslavia, My Homeland’) by Goran Vojnović won best novel of the year in 2011 in his country, Slovenia. But when a Croatian translation was recently displayed in Split, the bookshop window was vandalised. Vojnović, a filmmaker and ex-basketball player who was 11 when war broke out, says the novel is a child’s-eye view of the collapse of Yugoslavia. His protagonist is shattered to discover that his father, whom he thought missing in action, is not only alive but also a war criminal. The novel is set partly in Pula, where the author spent ‘idyllic, Yugoslavian’ summers at his grandparents’ house.

Lunching on Istrian mushroom pasta and truffles in Labin, a former coal-mining village now filled with artists’ studios, Vojnović tells me ‘the war is still not over. My generation is living the consequences, trying to challenge our roles and those of our parents.’ As he said in a packed hall,

everyone puts himself in the position of the victim; the other side is the guilty one. It’s very hard to see we’re all victims. It’s a tragedy that, even those of us who are not the mothers of Vukovar or Srebrenica, or who were in concentration camps, can’t be rational after the trauma. That’s how we leave the space open to manipulators who use our pain … But if a wound hurts, you have to go deeper to clean it. The longer you let it rot, the more painful it will be.

Vojnović, whose novel depicting Yugoslav migrants in Slovenia was entitled Cefurji raus! (‘Southern Scum Go Home!’), drew laughter when he mocked the notion of ‘mixed marriages’: ‘We’re happy and proud when a Croat and a Serb are in love. What a miracle! They grew up speaking the same language and watching the same TV shows. It seems trite, but we all bought this fiction that we’re completely different.’

Joyce considered language a net to escape from. There have been political drives in the former Yugoslavia to harden linguistic differences, notably between Croatian and Serbian. For Ivan Lovrenović, a Zagreb-born writer who lives in Sarajevo, ‘our literature’ is that which is written ‘in all the languages that can be understood without translation’. The Yugoslav break-up sundered the literatures – and book markets – of states that broadly share a common language (only Slovenian and Macedonian are distinct). The poet and critic Marko Pogačar warns against reinventing the wheel, as younger Croatians no longer consider Serbian or Montenegrin literature to be their own. Yugoslavia’s 1961 Nobel laureate Ivo Andrić, a Bosnian Croat writer who moved to Belgrade, is claimed by everyone and no one.

‘We’re all more or less writers of a disappeared world,’ says Miljenko Jergović, a Croatian who feels an affinity with Joseph Roth, Stefan Zweig and Robert Musil, who all wrote after the break-up of the Austro-Hungarian Empire. Born in Sarajevo, Jergović endured 18 months of siege before fleeing to Zagreb. The tender, ironic war stories of Sarajevo Marlboro (1994) and Mama Leone (1999) are published in English translation by Archipelago Books. Rod (‘Kin’), his latest novel and a bestseller last autumn, is a thousand-page autobiographical saga charting successive wars through his own ancestors. ‘It’s about burying everything of mine that is dead. My close ones are dead. My city no longer exists. Every place for me is a non-place.’

In the Mozart Cafe, Jergović, with a Tolstoyan grizzled beard and a ponytail, tells me that his great-grandfather was a German from Romania who came to Bosnia as a station master and married a woman from Slovenia. The First World War made him a ‘foreigner in his own country’. During the 1940s ‘he hid his Serb neighbours from the Ustaše’ (the Croatian fascists). In 1945, when the partisans liberated Sarajevo and wanted to deport him to a concentration camp ‘to cleanse Yugoslavia of Germans’, he was saved by those same Serb neighbours. Jergović’s ‘ethnically very complicated’ ancestry atunes him to the ‘destruction of minorities. It’s part of my dignity to try to protect them. This is enough in Croatia to make me an antichrist.’ A mooted referendum to ban the Cyrillic script associated with Serbs would, if passed, be an ‘invitation to lynch’. Jergović’s trenchant characterisation of Croatian TV as a ‘motivator of violence’ and its cameras as ‘even worse than Serbian guns trained at me in the siege of Sarajevo’ led a crew at the fair to stalk off. Croatian TV, he tells me, was founded in the 1990s as a ‘rigidly nationalistic institution. It leads raids on people who think differently.’

Jergović’s stand reminds me of Croatia’s great modernist writer Miroslav Krleža. In his 1938 masterpiece, On the Edge of Reason, a lawyer speaks out at a dinner party, a momentary lapse that causes his life to unravel, ending in stigma and jail. Needling his host, a banker who profiteered in the ‘criminal massacre’ of the First World War, the lawyer’s words strike at a malign system of values, from anti-Semitism to feudal rule by ‘gun and gallows’. Krleža’s mordantly brilliant oeuvre was shaped by a ‘deceitful pathos of lies’. During the First World War, he was entrenched on the eastern front, a lowly conscript already expelled as a deserter from the Hungarian military academy. In one short story in The Croatian God Mars (1922), ‘Hut 5B’ (translated by Celia Hawkesworth in Pete Ayrton’s excellent new First World War anthology, No Man’s Land), the rhetoric of fatherland is undercut by blood and pus. Krleža’s first novel, The Return of Philip Latinowicz (1932), was later admired by Sartre as a precursor to Nausea.

In Zagreb, the hometown Krleža deemed a ‘filthy little backwater’, I found baroque grandeur alongside buzzing bars, and dropped by the capital’s first book club-cafe. Booksa was founded ten years ago, partly with the aim of restoring severed cultural links. ‘Criticise This!’, a project completed last year, allowed critics from across the former Yugoslavia to write reciprocal reviews of art about the 1990s wars and have them published across borders. According to Booksa’s founder, Miljenka Buljević, Croatian society is ‘obsessed with the past, but it doesn’t know how to look at it constructively’. Across town, Zagreb’s Museum of Broken Relationships has a novel approach to ritualising the past. Created in 2010, the poignantly funny and melancholy museum displays offbeat, captioned mementos sent in by individuals of their lost or rejected loves. Running the excruciating gamut of intimate break-ups, the museum inevitably reflects Yugoslavia’s still-raw separation trauma.

Yugonostalgia is no hankering for Titoism – which had its own gulag on the scorched island of Goli otok and its own culture of lies – nor for socialism or indeed any ideology. But as was hinted to me by a Zagreb radio journalist, it is partly a nostalgia for ‘being together’. To embrace it may be one way of soaring above those pesky nets.