An all-female Iranian theatre group; a singing Lebanese nun; a play that presents testimony from Dutch volunteers with the SS: all these will form part of this year's Edinburgh International Festival, which will focus on the dynamic, ever-changing identity of Europe and the cultures on its fringes.

And, on perhaps a less elevated note, Matthew Bourne, creator of such hit ballet-theatre pieces as The Car Man and his all-male Swan Lake, will premiere his dance version of The Picture of Dorian Gray, which will see the usually carnivalesque Bourne move into darker territory.

This is the second Edinburgh festival programmed by Australian artistic director Jonathan Mills, who took on the role, as a rank outsider for the job, in late 2006. "When I came to the UK I realised that a lot of my preconceptions about living in the UK were wrong," he told the Guardian. "My received cliches about a Europe hidebound by tradition were challenged. A lot more was in flux politically than I had imagined." Hence the festival's jumping-off point as an exploration of Europe's fluid boundaries, borders and identities.

Big names in the festival will include a residency from the dynamic, visionary Russian conductor Valery Gergiev, who will bring his Mariinsky Opera (formerly the Kirov) to Edinburgh in a Polish-language production of the rarely seen Szymanowski opera King Roger. Gergiev will also lead the London Symphony Orchestra through all seven of Prokofiev's symphonies and all his violin concertos, with the Greek virtuoso Leonidas Kavakos as soloist. The Szymanowski was, said Mills, "a moment of personal indulgence - but I believe Szymanowski is as important as Janacek and up there with Berg and Sibelius. King Roger is a masterwork of the operatic repertoire."

The young Venezuelan conductor Gustavo Dudamel, who took Edinburgh and the Proms by storm last year when he brought his Simón Bolívar National Youth Orchestra of Venezuela to the UK, will return, this time with the critically acclaimed Gothenburg Symphony Orchestra.

This year sees the theatre programme in the festival is considerably bumped-up compared with previous festivals. The National Theatre of Scotland, which premiered Gregory Burke's Black Watch at the 2006 festival - a play that has toured to Broadway, Los Angeles, Australia and is now playing in Glenrothes, Fife, the heartland of the regiment's recruiting grounds - will present a new work by David Harrower. The play, 365 One Night To Learn A Lifetime, charts the journeys of adolescents in care as they make their first steps in the world by way of so-called "practice flats". The National Theatre's artistic director, Vicky Featherstone, will direct. "It's picaresque, convulsing, turbulent, colliding narratives," said Mills.

British playwriting will be seen through Polish eyes as Sarah Kane's now classic drama, 4.48 Psychosis, is brought to the festival by the company TR Warszawa. And a Bosnian company, East West Theatre Company, will present a version of Nigel Williams' play Class Enemy. Originally set in 1978 in south London, the Bosnian company transports the action to Sarajevo, 2007. Mills said, "I saw this production in the bombed-out wreck of the engineering faculty of Sarajevo. This is a very intense, fantastic young company, who are setting an example of how young Croatians, Serbians and Bosnians can come together through the theatre."

Also in the theatre programme, a collaboration between Muziektheater Transparent and Collegium Vocale Gent sees a recital of heart-stopping Schubert songs apparently interrupted by people who want to talk about their experiences as Dutch wartime volunteers for the SS. The play, Ruhe, is based on interviews with Dutch Nazis conducted in the 1960s. "It's so intimate; there's no escape. If you are sitting in the audience the person next to you could turn out to be a Nazi border guard," said Mills.

The State Ballet of Georgia will bring Giselle for fans of romantic tutu'd dance, with Nina Ananiashvili, formerly a star of the Bolshoi and New York City Ballet, in the title role, one of her signature parts. Tbilisi-born Ananiashvili is also the artistic director of the company - and they will also bring works by Balanchine, definitively associated with New York but in fact born in Georgia.

The famous Iranian film director Abbas Kiarostami will present an installation called Looking at Tazieh - a form of Shi'ite passion play, with music and singing - in which multiple screens show the different aspects of this ancient and, to UK eyes, alien art form. It will focus not only on the performers but also on the Iranian audiences, who attend outdoor performances of tazieh in large numbers.

Mills said that the festival had broken even last year, but was still carrying a £250,000 accumulated deficit. Its public funding - from the Scottish Executive, Edinburgh city council and the Scottish Arts Council - has been raised by £600,000 this year. "We have communicated very clearly with the government and they have acknowledged that what we need to fulfill the very high expectations of the festival comes at an international price," said Mills.

The emergence of other strong international festivals, such as Manchester's was, far from being unwelcome competition, a good thing, he said: "Any competition that keeps us on our mettle is welcome. Manchester's failure would have been more of a problem to us than its success."

Highlights

Opening concert
Rise and Fall of the City of Mahagonny, by Weill and Brecht. As in "Show me the way to the next whisky bar." Susan Bickley and Willard White sing.

The Two Widows
A new production of Smetana's work from Scottish Opera. Kate Valentine and Jane Irwin star.

I Went To The House But Did Not Enter
A new work by German music theatre virtuoso Heiner Goebbels with the Hilliard ensemble, using texts by Eliot, Blanchot and Beckett.

Reich evening
Anne Teresa De Keersmaeker brings a mini retrospective of her groundbreaking choreography to Steve Reich's music to Edinburgh for the first time.

Messiaen and Adès
In Olivier Messiaen's centenary year, his last work performed by the BBC Scottish Symphony Orchestra under Ilan Volkov, and the Scottish premiere of Thomas Adès' beautiful recent work, Tevot.

Karita Mattila
The great Finnish diva sings arias from Jenufa and Eugene Onegin. Sakari Oramo conducts the Finnish Radio Symphony Orchestra.

· The Edinburgh International Festival runs from August 8 to 31 2008. Public booking opens on April 12. Box office: 0131-473 2000