Le Creusot: the industrial town at the heart of France's looming job crisis

Mayor Camille Dufour is a Socialist who is mad at the Socialists. ''They don't understand up there in Paris,'' he says, throwing his hands toward the sky. ''If they don't start talking about employment, then they're going to lose us all.''

Mayor Dufour's anger shows how difficult it is for Socialist President Francois Mitterrand to imitate Ronald Reagan's supply-side economics. Ringing calls for entrepreneurship, modernization, and competition, backed up by recently announced cuts in taxes and government spending, do not translate well here in Le Creusot. The small Burgundy town is at the heart of the Creusot-Loire company's heavy engineering operations - and at the heart of a looming job crisis.

Creusot-Loire is broke. Following a rapid expansion in the 1970s, the company grew flabby. Losses reached 1.8 billion francs ($200 million), last year on sales of 12 billion francs, and the company is in receivership while awaiting a government restructuring project.

A preliminary plan called for elimination of 2,500 jobs out of a total of 6, 000. The proposal was withdrawn after Mayor Dufour and the unions blocked rail lines and highways. But the government can't delay this test of its policy of streamlining French industry much longer.

What makes the crisis even more chilling is Le Creusot's role as a symbol of French high technology. One of the world's most powerful metal hammers, built a hundred years ago and weighing some 100 tons, now serves as a monument. Louis XVI established a royal foundry here in 1782 to manufacture cannons for the French Army. Le Creusot built artillery for the two Napoleons and for the Army in World War I.

In the 19th century, the town spearheaded the development of French railways, and more recently, the development of France's nuclear industry. This industrial prowess translated into economic prosperity.

Proud municipal officials say no worker has ever been fired - even at the depths of the 1930s depression. For more than a century, the town's population has remained at 32,000.

''Every time France needed us, we were in the front lines,'' says Henri Prelet, director of the town's tourist office. ''We practiced the Japanese system before the Japanese.

''We always thought we were immune from the recession.''

Company paternalism absorbed the shocks from economic swings. Workers lived in company housing, were educated in company schools, and retired to company old-age centers.

This private paternalism was replaced by a state paternalism when the last Schneider passed on in 1960. The company reverted to a Parisian holding company and remained in private ownership, and the government's role grew. It played marriage broker in the 1970 merger of the Schneider heavy-industry holdings with those of the Marine-Firminy group, creating Creusot-Loire. The government pushed the new company into the lead in the country's nuclear development.

The Socialists increased state influence. For a while after their 1981 victory, outright nationalization was rumored. It never happened, but with the nationalization of the banks, Creusot's debts became a governmental preoccupation.

In return, the company and its workers looked more to the government to rescue them. When things started going badly, management demanded multibillion franc subsidies from the Industry Ministry.

''Only the government can finance a solution,'' says Michel Gane, local leader of the Communist-dominated Confederation Generale du Travail. Like many other workers and even some members of management interviewed, he favors a direct government takeover.

''France needs Creusot-Loire,'' he explains. ''How can we modernize if we destroy our modern industries?''

Mitterrand and his new prime minister, Laurent Fabius, disagree. They want a private firm to buy out Creusot-Loire. Despite the danger of large layoffs if no buyer is found, high-ranking officials say the government will not step in. Instead, they say, parts of the company will be auctioned off.

The rationale is that a newly competitive Creusot-Loire eventually will create more jobs. In the interim, the officials say stranded workers should be more like their American counterparts, moving to find jobs or even becoming entrepreneurs.

To encourage such individualism, Mitterrand's recently announced budget for 1985 includes a 5 percent across-the-board reduction in personal income taxes. It also slashes government spending.

''Too much tax chokes our economy, limits production, and limits incentives, '' the Socialist-cum-Reaganite President said in announcing the budget.

In Le Creusot, this advice is scorned. labor leader Gane complains that ''those who make lots of money will now pay fewer taxes, while those who are out of jobs will receive less help.''

Management doubts the government's sincerity. Company spokesman Jean Baldy complains, ''Unlike in America, we still have to get government permission to fire workers, and in each case, the government drags its feet.''

Meanwhile, workers facing layoffs refuse to move on in search of prosperity. ''I know nobody here who wants to leave,'' says tourist director Prelet. ''Frenchmen are too attached to their land, their habits, their family, their friends.''

Even the jobless young don't dream of moving on or starting their own busi-nesses. ''All my friends say they have to leave, yet none of them are doing that,'' says 21-year-old Philippe Jeumet, who is completing a nonpaying internship at the tourist bureau. ''The American model scares us. We want security. We don't want to take chances by moving and creating our own enterprise.''

Meanwhile, Mayor Dufour presides over an increasingly angry populace. As elsewhere in the country, the unions are on the defensive. Fearful of precipitating permanent job cuts, they have been hesitant to call workers out on strike. But if significant layoffs are announced, Dufour says workers with nothing to lose might lead a walkout or even generate mob violence.

''We've never had violence in Le Creusot, but we're moving toward that,'' he says.

Politically, the repercussions of layoffs could be just as destructive. Dufour won a landslide election in 1977, and a smaller, if still considerable majority, last year.

Rumors are circulating that if the Socialists in Paris don't bail him out, he will quit. He denies this, but he admits the Socialist electorate here feels deceived.

''People voted Socialist because they thought the Socialists would protect their jobs,'' he says. ''What's happening now is a tragedy.''