Welsh literature has a reputation for being lyrical and passionate, inspired by alcohol, sheep and the stunning landscape. Gwyneth Lewis deftly examines the current state of writing from Wales and finds that those enthusiasms may still exist but are being explored in bolder and more inventive ways than ever before.

On 9 November, 50 years ago, Dylan Thomas died his rock-star death in New York. He may not have drunk the 18 straight whiskeys which he claimed, but a mixture of alcohol, exhaustion and badly prescribed medication killed the near-diabetic poet. This tragedy may have finished his career as a writer, but it gave a huge boost to his status as an icon of the poetic soul. Half a century after his death, Thomas is still inspiring biographies like the newly released Dylan Thomas by Andrew Lycett, which catalogues the sponging, fornicating and heavy-drinking activities of the poet. In one particular bender Thomas ended up getting his private parts stuck in a two-pound jar of honey and, somehow, a button stuck up his nose.

For a Welsh writer Dylan Thomas is a large figure to be negotiated. Most Welsh poets have tried drinking as much as Thomas, in the hope that it would inspire them to write equally good poetry. From experience, I can tell you that it doesn't. All you end up with is a hang-over and sheets of scribblings which seemed great at the time but are meaningless the following morning. Leaving alcohol aside, Dylan Thomas's musical, ornate style looks easy to imitate but brings down all but the strongest writers. It's like wearing a red trouser suit when you're a middle-aged woman: you have to be something special to bring it off.

It's easy to forget that R. S. Thomas, that most spare of Welsh writers, was Dylan Thomas's contemporary. R. S. Thomas, an Anglican vicar, continued to write into his eighties and is still publishing, even after his death. A collection of poetry found in his papers, Residues, was published in 2003, showing how a talent could deepen with age and produce late, great poetry and not a pub or a flowery phrase in sight.

A few years ago, after a referendum, the Labour government delivered devolution in Wales. Many government powers are now decentralised from London, and Wales has its own elected Assembly in Cardiff Bay. This has made a huge difference to the psychology of life in Wales, where politicians can no longer blame London for all their problems. Having been away living on a boat for 15 months, I had a shock recently to come back to Cardiff and find that with the increased self-confidence and booming city, some of the worst aspects of big-city life had reached my home town: my car was clamped on a Sunday and cafés in the rapidly developing Cardiff Bay charge an arm and a leg for fancy coffee and tea. Such is the price of success. Devolution (despite its inevitable hiccups) has been a dream come true for nationalists but has, ironically, taken the main plank of their existence from under their feet. The same is true of writers for whom the nationalist cause was a central part of their work: without their old subject, what else is left for them to write about?

This question is partly answered by two important anthologies of Welsh-language poetry that have recently been published. The first is Menna Elfyn and John Rowlands's monumental Modern Welsh Poetry, published by Bloodaxe. This is the first comprehensive selection of modern Welsh-language poetry translated into English and allows the Welsh (eighty percent of whom don't speak Welsh) and the English to see the previously hidden landscape of Welsh poetry. It also provides a stimulating re-framing of their own tradition for Welsh-language speakers, a new context in which to work in the twenty-first century. Poet Robert Minhinnick, who just won the Forward Prize for the best poem of the year, has produced his own promiscuous translations of six contemporary Welsh poets (including me) in his anthology The Adulterer's Tongue. These vibrant new versions can even create surprises for the author – Robert's translations have surprised and delighted me and I thought that I knew the originals from which he was working! My work has been Minhinnicked, and I like the result.

Traditionally Welsh culture has been strong in music and poetry, but the novelists and screenwriters are making strong bids to catch up in the bardic race. Welsh writers in both languages are forgetting, mercifully, that their more traditional subject matters have been sheep, religion and both of the above set in mountains. Undeterred by the fact of writing in a minority language, writers like William Owen Roberts, whose first big novel, Y Pla (The Plague) was translated into English and German in the 1980s, are now engaged on hugely ambitious projects. Wil's last book, Paradwys (Paradise) took in the whole scope of European culture and economy, including slavery, on its spacious canvas. The Welsh eye is being turned out onto the world as a whole, using what used to be a provincial idiom to bear on global issues from a local perspective. After all, everybody in the global village has a hometown of their own as well.

Once confined to such romantic tales as Richard Llewelyn's How Green Was My Valley, Wales is finding itself increasingly in books which aren't so much novels for the Welsh as ripping yarns which happen to use Wales as a setting. Following Aberystwyth Mon Amour, Malcolm Pryce has just published Last Tango in Aberystwyth. Both novels are set in a former seaside resort which is on the far west coast of Wales. Pryce uses the town as a setting for a surreal tale of druids and pensioners running a drugs underworld. This is using the traditional Celtic love of the absurd and outrageously imaginative to illuminate the madnesses of the modern world. In his comic gem, The Eyre Affair, Jasper Fforde writes of an Independent Republic of Wales of the future. This delicious literary detective novel features officer Tuesday Next, whose job it has been to save Charlotte Bronte's Jane Eyre from a villain who wishes to change the ending. Again, this fantastic inventiveness seems to me to be characteristically Celtic, though it is more usually practised by would-be poets perched on stools in bars, which brings me back to the ghost of Dylan Thomas. Writers are much wiser to be mad, bad and dangerous to know in their work than in real life. What happens next in Welsh writing is going to be very interesting to watch.

Gwyneth Lewis is a poet who writes in both Welsh and English. Her most recent collection is Keeping Mum: Voices from Therapy and her acclaimed memoir on depression, Sunbathing in the Rain, was published in 2002.