In 1997, the idea that art could kick start a flagging economy was still relatively novel. But as Londoners and Liverpudlians have seen, it’s an idea that works. Tate Modern and Tate Liverpool transfigured their respective waterfronts. Here in Bilbao, the transfiguration was even more dramatic.

The mission of the museum was that the building would help transform the nature of that site Juan Ignacio Vidarte, Guggenheim Bilbao's director

Back in 1997, the city was embroiled in bloody conflict, as the Basque separatist group ETA carried out a terrorist campaign against the Spanish state. The ETA ceasefire in 2006 was a key factor in Bilbao’s renaissance. Some Basques believe the Guggenheim helped bring this ceasefire about.

The Guggenheim’s director, Juan Ignacio Vidarte (photograph by Getty Images), has been on board from the beginning. In his sunlit office, overlooking the river, he tells me how this museum evolved. Born here in Bilbao, his childhood hometown was very different from the city where he lives and works today. ‘The news would always be bad,’ he recalls. ‘Another factory closing, another violent act by ETA.’ This museum was an audacious bid to buck this trend.

‘It was a very controversial project,’ explains Vidarte. ‘Public money was involved - so it was politically charged.’ It wasn’t only the politicians. The voters were also sceptical. Yet despite this pressure, Vidarte and his team weren’t interested in building something cheap and cheerful. They wanted to build a museum which would arrest the eye.

‘We thought it was important that the face of the building would convey to the world the ambition of the project,’ he says. ‘Bilbao is not London, it’s not Paris, it’s not New York.’

Therefore, the architecture had to punch above its weight. Gehry got this completely. His design was a perfect fit.

Once the museum opened, the locals were soon won over. ‘The museum has been a major catalyst of economic development,’ says Vidarte. ‘It has helped the city transform itself.’ Directly and indirectly, the Guggenheim now generates about €400 million every year. There are also additional benefits which are impossible to measure, from publicity to civic pride.

‘The museum gave the citizens and the politicians the courage to keep moving and be brave, which was what the city needed at that time, because the situation was very dire,’ says Vidarte. ‘It has become a more open, more cosmopolitan, more contemporary city.’

Yet Bilbao hasn’t lost its character. Its industries have changed, but it is still an industrious, gutsy place. Cultural tourism is just one element. Surrounded by high rise flats and flyovers, the museum is integral to the modern city, not a place apart.

What made the Guggenheim so successful was that it wasn’t built in isolation - it was part of a wider programme. The river was cleaned up, the city centre was spruced up. ‘It was a scar in the middle of the city,’ says Vidarte, of the view from his office window. ‘The mission of the museum was that the building would help transform the nature of that site.’

Now this riverside is somewhere to hang out, like London’s South Bank.