Kaiserstrasse pub, which opened last week, is the city's second "drinking room".

corner pub in Kiel's down-at-heel Gaarden district hollow-cheeked men with tattoos sat at the bar, chain-smoking roll-up cigarettes as they cracked open the beers they had just bought at the discount supermarket down the road.

"They let you do what you want in this town, there's no pressure to go to anything like Alcoholics Anonymous," insisted one of them.

Behind the bar a corpulent bartender with shoulder-length hair and a worried look on his face puffed at a fag as he served up tea, coffee, coke and mineral water to the motley crowd around him.

Oddly for a corner pub, the row of beer taps behind the bar were capped. Permanently sealed and covered with a dishcloth, they visibly crushed even the remotest hope of a pint.

As probably the only drinking establishment in Germany in which you can smoke your head off but will always be refused an alcoholic drink, the bar in Kaiserstrasse is no ordinary pub. It is the latest of the city's so-called "drinking rooms" – a taxpayer-funded pub for alcoholics which social workers and the public have hailed as a runaway success.

"We are giving space to people who have serious problems who we have been unable to help," is how Torsten Albig, Kiel's mayor, justifies the project. "These people are part of our society and they won't just go away because they are a nuisance."

The Kaiserstrasse pub, which opened last week, is the city's second "drinking room". It costs taxpayers €33,000 a year to run. The pub is staffed by reformed alcoholics and members of the Hempel's social welfare organisation, which deals with the city's so-called "street scene" – the homeless, alcoholics and drug addicts.

Reinhard Böttner is one of the social workers there. He takes exception to those who argue that the project is proof of the welfare state's failure because it simply panders the problematic without trying to reform them. "The drinking rooms are one of the few ways of reaching these people. Do you think that you can just walk in and persuade them to kick the habit?" he asked.

The city's first drinking room opened seven years ago as part of an attempt to discourage street drinkers. The project was inspired by the so-called "fixing rooms" in Zurich in the 1980s to keep heroin addicts off the streets. Kiel says that its drinking rooms are so successful that other German cities, such as Dortmund and Hamburg, are planning to copy the idea.

"There are no complaints about the drinking rooms. Everyone has come to regard them as something positive," insisted Christoph Schneider, of Kiel's housing department, who is credited with inventing the idea. "The public are pleased that drinkers are off the streets and the street scene is happy to have somewhere to go. They don't much like drinking on the street. They want a social life as well."

The project caters for a clientele of 70 alcoholics and drug addicts on the heroin substitute methadone who also use alcohol heavily. They open at 10am and close at 4pm, and customers are allowed to buy only tea, coffee and soft drinks. If they want to drink alcohol, they must bring their own, and it is limited to beer or wine with a low alcoholic content. Violent or abusive customers are banned for periods ranging from 24 hours to a month.

However, the drinking room's most controversial rule is that customers should not be required to seek assistance to help them quit. "We never force people to get help," said Jo Tein of the Hempel's welfare group. "We only provide assistance if people ask for it."

The help offered includes advice on how to solve problems with landlords or manage finances. Staff also help to find customers low-paying jobs behind the bar or selling the city's "street scene" newspaper.

Mr Schneider said the project's softly-softly approach had helped some 20 alcoholics to kick the habit. He claimed an 87 per cent success rate for the drinkers who really wanted to stop. "We've almost completely done away with complaints from the public about alcoholics in parks and squares and causing a nuisance," he said.

Dirk, one of the drinkers, said that together with a group of other drinkers, he used to go to a nearby Aldi discount store and buy palettes of cheap beer to consume outside.

"We soon got complaints from the manager. Then the police used to show up and turn us over. It became such a hassle that we had to move on, but within a matter of days we had the police on our backs again," he said.

Like several of the drinkers, Dirk has a criminal record. He took to alcohol after he lost his job in Kiel's docks and his wife divorced him. A series of petty offences landed him in prison for a year. He subsists on the minimum German social security payment of €359 a month and lives in a council flat. He said all the doors except his on his floor had been kicked in.

"I don't like hanging around there. It's much nicer here in the drinking room. At least you can meet your mates," he said.

Dirk said he had not had a job since leaving prison. "They all know me round here. The job office has written me off as unemployable," he insisted. Kiel has an unemployment rate of 7 per cent.

Kai, the drinking room's barman and one of the few alcoholics who have managed to kick the habit with help from drinking-room support staff, said the project meant everything to him: "I stopped 18 months ago. I couldn't have done it without the drinking room. For me it was the first place I was accepted as I am. There was nobody trying to push me around and I no longer had to feel afraid," he said.