Tucked away in the foothills of the Alps in the Italian-speaking region of Switzerland, Locarno has made a habit of picking tomorrow's stars. It premiered Vittorio De Sica's Bicycle Thieves in 1949, and American independent directors Spike Lee and Jim Jarmusch also made their international debuts there.

Now celebrating its 60th year . . .a birthday it shares with Cannes, making it one of the oldest festivals in the world . . . Locarno has celebrated by inviting back a bunch of major directors whose first movies it launched; Claude Chabrol's Le Beau Serge, for instance, in 1958, Mike Leigh's Bleak Moments in 1971 and Catherine Breillat's 36 Fillette in 1988.

Neutral Switzerland has always been a haven for outsiders. James Joyce spent much of his exile in Zurich and on his doctor's advice wintered in 1916 in Locarno, where he finished the opening three episodes of Ulysses.

"From its earliest days, Locarno has been a festival of discovery and it will continue to be, " says its artistic director, the French critic Frederic Maire. Last Sunday's Golden Leopard awards, chaired by local Swiss actress Irene Jacob, bore this out. Two first-time Spanish directors were among the winners . . . Jaime Marques was named best newcomer with Ladrones, and Rose Aquilar's debut Lo Major De Mi won Marian Alverez the best actress award. Both films are love stories, as is Masahiro Kobayashi's Ai No Yokan, winner of the Golden Leopard for best picture. Veteran French actor Michel Piccoli was chosen as best actor for Sous Les Toits De Paris and Philippe Ramos as best director for Captain Ahab, an imaginative reworking of Moby Dick. Maverick Hollywood director Frank Oz . . . creator of many of The Muppet Show and Sesame Street puppet characters and whose previous movies Bowfinger and The Score also featured at Locarno . . . scored the biggest hit at the festival's famous open-air screenings in the Piazza Grande by beating The Bourne Ultimatum for the audience award with his raunchy politically-incorrect farce, Death At A Funeral. Think of a wrong coffin, the surprise arrival of a gay lover who happens to be a blackmailing dwarf, add in a hypochondriac cousin, and sibling jealousy, and you get the picture.

"It's fun to annoy people, " Oz tells me. "I vomit when I see bland comedy." Fed up with studio interference on his $60 million remake of The Stepford Wives, he last year temporarily abandoned the US for the UK. "I was looking for something small where the budget wasn't beholden to stars, " he says. "I wanted to get back to the purity of just actors, a story and passion.

The Stepford Wives had an enormous budget . . . it was like a B52 bomber . . . but it wasn't successful.

It was not the film I intended to make. For the first time I lost my way. I listened to the producers.

When you get huge stars like Nicole Kidman, you get all the paraphernalia that attaches to them. It's not their fault, it's the system. Now instead of B52s, I just want a little fighter plane."

First time director Jaime Marques rewrote much of the beautifully textured Ladrones (Thieves) so he could cast Juan Jose Ballesta as a pickpocket who flirts with a student from an upper class family looking for thrills by stealing purses. Ballesta was mesmerising as a barrio kid from a dysfunctional family in Archero Manas's El Bola four years ago. The girl is played by Maria Valverde, seen by many as the next Penelope Cruz.

Paul Greengrass's The Bourne Ultimatum is every bit as gripping as The Bourne Supremacy, perhaps almost too much so. But it packs a terrific punch projected on a screen the size of a Swiss bank at its Piazza Grande screening.

Captain Ahab, Philippe Ramos's re-imagining of Moby Dick, provides Herman Melville's visionary pursuer of a giant whale with an intriguing back story told in five chapters, each with a different narrator, from childhood through to early loves, all invented, to an altered ending, with French and Swedish landscapes standing in for New England, a daring appropriation of a great American literary classic.

Contre Toute Esperance is the second part of a trilogy on faith, hope and charity by Bernard Edmond, a French Canadian director new to me but with compassion reminiscent of Kieslowski.

One of the many treats of Locarno is its readiness to embrace comedy and off-beat romance, whether withKnocked Up, Judd (The 40-year-old Virgin) Apatow's terrific subversion of the conventions of a storybook romance, or Hairspray, Adam Shankman's musical reworking of the John Waters 1988 cult comedy, or the stylised wistfulness of Adrienne Shelly's posthumous Waitress and the political playfulness of Daniele Luchetti's My Brother Is An Only Child. This balance of fun and seriousness carries through into Locarno's special programmes.

While Open Doors provides a platform for filmmakers from the Middle East, Signore & Signore is a brilliantly conceived homage of the great divas of Italian cinema, 20 films each showcasing a different icon, starting with Alida Valli and Anna Magnani, and lingering on Sophia Loren, Gino Lollobrigida and Giulietta Masina before embracing the new generation of Monica Bellucci and Laura Morante.

"I was always a girl who had problems, very reserved, rarely talking with other people, " says Claudia Cardinale. "I hid away in my dreams, in my imagination."

Movies, as Orson Welles once said, are a ribbon of dreams, and with these glorious women they are made flesh. Locarno does divas . . .and cinema itself . . . justice.

'Death At A Funeral' opens in Ireland on 28 September. 'The Bourne Ultimatum' and 'Waitress' have just opened.

'Knocked Up' is due on 28 August