Berlin's racy answer to the Folies Bergère in Paris is on the brink of bankruptcy, raising fears that the age of the high-kicking scantilly dressed chorus girl is at a close.

The Friedrichstadtpalast, the music hall at the heart of the Roaring Twenties, has appealed to Klaus Wowereit, the Mayor of Berlin, to provide €3.5 million (£2.8 million) to fend off imminent financial collapse.

“This was completely unexpected,” an official at the cash-strapped city's culture department said. “It is deeply worrying and depressing.” This was the theatre where Marlene Dietrich made her debut, leaning back on a couch and bicycling her long legs.

Above all, it upheld a tradition of near-naked young women performing risqué dance routines with almost military discipline. When Max Reinhardt, the theatre impresario, took over the music hall in the 1920s it had been used for years as a circus and even now the numbers tend to resemble the trotting of horses around a ring. There was seating for an audience of 3,000 and, in the prewar years, it was full every night. Reinhardt, overstretched in his management of a whole theatrical empire, handed over the music hall to Eric Charell, the choreographer, who promptly invited the Tiller Girls dance troupe from London.

Times Archive, 1937: Miss Marlene Dietrich's naturalization

Der Sturmer, the organ of Herr Julius Streicher's anti-Jewish campaign, reproduced yesterday a photograph of Miss Dietrich taking the oath

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Soon Berlin was rivalling Paris as a place to see naked female flesh: Charell's scouts found Moroccan belly dancers and lithe female acrobats. Nearby, in the Nelson Theatre, the dancer Josephine Baker performed, kitted out in only a girdle of bananas.

The city has never quite recaptured that combination of glamour and seediness. The Nazis; the arrest or forced emigration of Jewish songwriters; the bombing of theatres and the crippling conformity of the East German communist regime: all conspired to squeeze the naughtiness out of Berlin.

The theatre is now working at 60 per cent capacity and is dependent on more than €6 million of annual government subsidies. Mr Wowereit believes that the music hall is a vital part of the city's image — his slogan for Berlin is that it is “poor but sexy” — but he has to persuade a sceptical city parliament that it should spend yet more money on chorus girls rather than kindergartens.

His efforts might be in vain. “Chorus girls? That's something for my grandad,” said Eike Depping, a 23-year-old student wheeling her bicycle past the huge music hall.

“This is Berlin, not Las Vegas. You don't have to pay for a theatre ticket to see women without clothes.”

The Blue Angel

— Marie Magdalene Dietrich, born in Berlin-Schöneberg in 1901, wanted to be a violinist but a hand injury forced her to find another career

— Her stage name, Marlene, was chosen for its combination of her first and second names

— She became a US citizen in 1937 and was reportedly offered money to return to Germany. She said she would return only when one of her Jewish friends could accompany her

— She was awarded the French Légion d'honneur in 1950 for her services in entertaining the troops and was later promoted to “officer” by President Pompidou

Sources: marlene.com; marlenedietrich.org.uk

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