Two decades ago, Judy Craymer had a dream: to create a musical based around the hit songs of Abba. By 1997, she had sold her flat, invested tens of thousands and was almost broke. A decade later, Mamma Mia!had become a $2 billion global phenomenon. So when Hollywood came looking for a piece of the action, Craymer was able to dictate her terms, she tells Tim Adler

ONE THIRD OF THE WAY into Mamma Mia! The Movie, there comes a moment when even the most hard-hearted of cinemagoers must think, "Ah, the hell with it", and surrender to this musical based on the songs of Abba. Or as Judy Craymer, the film's producer, puts it, let the joy wash over you.

Everybody on screen seems to be having such a dang good time for a start. Camp as a mirrored disco ball, Mamma Mia!stars Meryl Streep as faded rock chick Donna, now a single mother running a hotel on a Greek island with her daughter Sophie. On the eve of her wedding, Sophie invites three men to the island - played by Pierce Brosnan, Colin Firth and Stellan Skarsgard - any of whom could be her father. What follows is an almost Shakespearian comedy of mistaken identity set to Abba's greatest hits.

This is not to say that the film does not have a few cringe-inducing moments like something out of a Cliff Richard musical. The film is almost undone by Julie Walters' frightful mugging, and Pierce Brosnan's singing sounds alarmingly like Shane MacGowan.

But the revelation is Meryl Streep. Who would have thought that the anguished star of Sophie's Choiceand The Deer Hunterwould be such a great physical comedian, doing pratfalls as cartoonish as Fritz the Cat?Indeed, the cast seem to be enjoying themselves so much you feel like handing out doses of lithium to bring them all down a little.

But the story behind Mamma Mia!is in many ways more interesting than the movie itself. It is the story of one woman's determination to get something made, taking a great risk, and at one point even selling her flat to keep the production going.

In the early days, Craymer was so broke that she had to squat in people's offices to use the phone, hoping people would not notice that woman in the corner. She and the show's writer, Catherine Johnson, used to meet halfway between each other's houses to discuss the script because neither of them could afford the full train fare. The greater the risk, the greater the reward. Today, Craymer earns an estimated €5m million a year from Mamma Mia!.

Let's just run through the figures. The show has been seen by more than 30 million people in 170 cities and eight different languages. The international touring version that premiered in Dublin in September 2004 has now been seen by two million people. There are currently nine different productions around the world generating €5m million a week in ticket sales. More than 17,000 people see the show every night. All of which means that Mamma Mia!has become a $2 billion (€1.27bn) phenomenon.

Craymer first met the songwriting team behind Abba, composer Benny Andersson and lyricist Björn Ulvaeus, when she was working backstage on Chess- the musical they wrote after the group broke up - in the early 1980s. Craymer was sure there was a musical to be made out of Abba songs, but at first Andersson and Ulvaeus didn't want to have anything to do with it. They were trying to forget being in the pop group, reinventing themselves as Broadway composers. Chessflopped on Broadway and the songwriters became more amenable. There had been one previous stage show based on the Abba back catalogue, the sublimely-titled Abbacadabra, but this had rewritten the songs. Of the two men, Ulvaeus was more sympathetic because a musical would have actors singing his lyrics rather than just some cheesy tribute band. But it still took Craymer seven years of badgering the two before they finally caved in and agreed to let her have the songs.

Even then she would only have them for a short while. If she couldn't get things moving then the songs would revert back to Andersson and Ulvaeus.

Craymer sold her flat to get some seed money together. "I was incredibly overdrawn and I had to get some cash from somewhere. This money wasn't enough to live on, it was just enough to pay for the songs and the writer," she says. But the biggest risk was that, despite spending £20,000 of her own money and two years of her time, Andersson and Ulvaeus could change their minds at any time and pull out.

She hired Catherine Johnson to write the book, telling the playwright that a lot of Abba songs suggested themes of weddings and holidays. She astutely pointed out that Abba songs fell into two groupings: the younger, more playful songs such as Honey, Honeyand Dancing Queen, and the more mature and emotional songs such as The Winner Takes It All. Craymer felt that The Winner Takes It Allwould be the Don't Cry For Me, Argentinaof the show, or, as the Americans put it, the eleven o'clock number.

The big make-or-break pitch meeting with Ulvaeus nearly didn't happen because Johnson, a single mother, couldn't find a babysitter for her children. Ever the producer, Craymer managed to produce one.

Craymer then picked respected theatre and opera director Phyllida Lloyd, who had previously worked at the National Theatre, the Royal Shakespeare Company and the Royal Court, to direct the show.

Craymer had not only to get Andersson and Ulvaeus onside, but she also had to convince their long-time manager Stig Anderson and PolyGram, the record company which owned the Abba back catalogue. She remembers a particularly crunchy meeting with record company executives trying to persuade them to invest £1.5 million in the show - and then asking them if she could have some of that money right away.

Eventually Craymer raised £3 million with which to open the show through a mixture of investors, including a Swedish bank whose credit committee were obviously Abba fans.

Craymer says there had been a lot of Hollywood interest in Mamma Mia!over the years. Soon after the show opened in London, several film companies approached her into making a movie.

"Mamma Mia!begged to be a movie, but first I had to get the shows to the point where it was appropriate to make the transition." Tom Hanks went to see the show and approached Craymer to see if she wanted to go into business with him on a movie version. Hanks's film company made My Big Fat Greek Wedding. Craymer says the easiest thing would have been for her to take the money. But she was determined to keep the original team together, despite the wishes of Universal Pictures, which wasn't keen on a first-time director taking care of its $32 million investment. Hanks eventually became the film's executive producer.

Mamma Mia!is, to an extent, a self-portrait of the people making it. The creative troika behind Mamma Mia!joke that Donna and her superannuated girlband The Dynamos are really themselves up on stage. Johnson is the slightly chaotic single mum, Lloyd is the practical Rosie and Craymer thought of herself as the high-maintenance Tanya - that is, until she met Meryl Streep.

Streep went to see the show when it opened on Broadway and wrote a letter to the cast, telling them how much she loved the show. Craymer was so chuffed that she kept a copy of the letter on her fridge. When Streep said yes to star in the movie, suddenly Craymer's phone calls were being returned.

Some think that Mamma Mia!could be the surprise hit of the summer. Others point to how badly other movie versions of hit musicals have done at the box office. Universal spent £22 million on the movie version of The Producers, keeping the musical's original director on board for the film, which received poor reviews and unexpectedly stiffed at the box office, grossing £18 million, having been judged too "stagey".

"Everyone puts fear into you," says Craymer. "Will it be marketed properly? Will anyone go and see it?" She says one difference between Mamma Mia!and other movie musicals such as The Producersand Phantom of the Operais that both of those shows were stage-bound. Mamma Mia!on the other hand is set on a magical sun-drenched Greek isle.

And yet, this delicious, honeyed Greek pastry that Craymer has baked leaves you with a tart aftertaste. You can't help but feel that there's something cynical about the way that Craymer has made a wish-fulfilment fantasy aimed squarely at the fat-bottomed coach parties who go and see the show. She admits that she was never into Abba as a teenager, preferring much cooler glam rock and Led Zeppelin, while Catherine Johnson says she was into the Sex Pistols.

And if, having bought the records, seen the stage show and watched the movie, you still want to give the Abba machine some more of your money, money, money, you will be pleased to know that an Abba museum opens in Stockholm next year.

Mamma Mia! opens next week