whoops, forgot the link to Wiki:
http://en.wikipedia.org/wiki/Bunte_Republik_Neustadt

I´d recommend the BRN, Bunte Republik Neustadt in Dresden, Germany. Found 1990 after the fall of the wall to protest against the rising rents, destroying of the buildings and such some inhabitants of the district declared independence, named a king and invented their own flag and money. The political roots are almost forgotten, but every year at the 2nd weekend in June there is a big festival where the streets are shut down, people put out tables and chairs and bring food and drink. Up to 1000 artists play, this year there were 150,000 guests.