ECONOMICS : Labor Pains for La Belle France : Unions get new confidence after Prime Minister Balladur backs down in Air France strike.

The topic under discussion at the elegant George V Hotel here this week was “uncommon courage--bold new models of corporate leadership.” But none of the assembled business leaders was too surprised when one of the courageous featured speakers canceled at the last minute.

Bernard Attali had been invited to discuss his tough new plan to shed 4,000 of 63,000 jobs at the beleaguered state-owned airline, Air France. But the problem was, Attali was no longer head of Air France. In fact, he didn’t have a job at all.

Attali resigned two weeks ago after Prime Minister Edouard Balladur caved in to workers who had launched a massive, ugly strike at Air France over the job-cutting plan. Balladur agreed to jettison Attali’s plan, only two days after calling it the only hope for the airline.

As Balladur’s loss of nerve suggests, courage and boldness are in short supply among European politicians during these economically difficult days.

The two-week Air France strike, which cost the airline $12.5 million a day, is over and the airline’s 500 daily flights are operating again. New Chairman Christian Blanc has promised to draw up another restructuring plan in the next three months. But he has only postponed Air France’s troubles.

And few here will soon forget the scenes of strikers rushing onto the runways, police firing tear gas at stone-throwing airline workers, and thousands of stranded air travelers. In fact, the confrontation has raised fears across this country that a troubling new wave of social unrest may be on the horizon.

The strike was the first major test of Balladur’s 6-month-old conservative government, and the stopgap solution has not inspired confidence.

“Balladur . . . looks increasingly adrift in a sea of conflicting pressures and demands,” the Financial Times of London said in an editorial.

Only a few weeks before, Balladur’s political fortunes were soaring. Despite the country’s economic recession and rising unemployment now nearing 12%, the sophisticated, articulate prime minister had high ratings in polls and was being touted as the likely winner of the next round of presidential elections, just 18 months away.

But the strike at the airline, which is expected to lose $1 billion this year, burst that balloon. Balladur’s ratings, though still high, have sunk, and some analysts believe he may have undermined his commitment to restore the health of government-owned companies.

Part of that plan calls for putting 21 state-owned companies on the auction block for privatization. Banque Nationale de Paris was sold last month.

But other money losers, such as Air France and the computer company Groupe Bull, will need restructuring before they can be made attractive enough for private investors. And that will likely require some job cuts, which could be dangerous in a recession and which, in any event, France’s public-sector unions have vowed to block.

Before the Air France strike, labor leaders were thinking they might have to accept the painful cuts the government was demanding. Now, their resolve to fight has been strengthened.

“Yes, it is possible to win,” said Force Ouvriere, one of the union groups leading the Air France strike. “The employees are victorious.”

Balladur’s difficulties have given new, although still small, signs of life to his Socialist opponents. As the daily Le Monde commented recently, “Maybe it’s too early to talk about the pendulum swinging back, but the fact is that, even on the banks of the Seine, the conservative wave finds itself thwarted.”