The interaction of intense extreme ultraviolet femtosecond laser pulses (lambda = 32.8 nm) from the FLASH free electron laser (FEL) with clusters has been investigated by means of photoelectron spectroscopy and modeled by Monte Carlo simulations. For laser intensities up to 5x10(13) W/cm(2), we find that the cluster ionization process is a sequence of direct electron emission events in a developing Coulomb field. A nanoplasma is formed only at the highest investigated power densities where ionization is frustrated due to the deep cluster potential. In contrast with earlier studies in the IR and vacuum ultraviolet spectral regime, we find no evidence for electron emission from plasma heating processes.