The Avignon Festival is the latest of France's 600 arts festivals to be cancelled, after the dance festival of Montpellier, the opera festival of Aix-en-Provence, the rock music festival of La Rochelle, and countless others. Avignon, however, holds an exceptional position in French theatre and culture. It was founded in 1947 by the great actor, director and theatre-maker Jean Vilar - "a republican monarch", as the late French critic Bernard Dort called him. It was the cultural emblem of national reconstruction after the Second World War and the end of Nazi occupation. Held in the grand courtyard of the Palais des Papes, Vilar's open-air festival attracted a 4,000-strong audience, assembled a galaxy of future stars - the young Gerard Philipe and Jeanne Moreau among them - and renewed the classics of French and European theatre. It was because of attending Avignon in 1959, at the age of 18, that I chose to go into the theatre: it provided a model of the kind of theatre I believe worth fighting for.
The festival became a polar opposite of the effete, overdecorated theatre of postwar Paris. It gave birth to the Theatre National Populaire, a people's national theatre, playing both in Avignon and at the Palais de Chaillot in the capital. Vilar conceived of the theatre's civic mission in the highest terms.
As the Algerian war reached its climax, with the French fascist Organisation de l'Armee Secrete exploding bombs in Paris, and rebellious army officers threatening a putsch, Vilar responded with plays that made powerful moral statements: Jean-Paul Sartre's updated version of Aristophanes's Peace; Bertolt Brecht's Resistible Rise of Arturo Ui, a warning against a fascist takeover; Pedro Calderon de la Barca's Mayor of Zalamea, about a popular uprising against tyranny.
This year's Avignon Festival was annulled following demonstrations and disruptions by les intermittents (the casual workers of theatre - actors, musicians, technicians). They are protesting over the right to unemployment benefit for members of a notoriously precarious profession. In the past, in an attempt to support French culture against Americanisation, the government granted a year's benefit to any unemployed theatre-worker who had worked 507 hours in the previous year. But it has now introduced reforms, triggered by a £560m deficit in the scheme, that increase the working hours needed to qualify for the benefit and reduce the period over which it is paid.
But does this justify bringing Avignon to a halt? Why not penalise France 2 and other state television channels, which have exploited the unemployment benefit by hiring artists and technicians cheaply and without social security obligations? Why were the Rolling Stones concert and the Johnny Hallyday roadshow allowed to proceed? Why was Avignon's offer of a platform to bring the issues to each night's audience not accepted?
The arrangements for what Jean-Marie Messier called "l'exception culturelle francaise" are, in fact, far more generous than in Britain, where unemployed theatre-workers are treated no differently from anyone else out of work. And in Silvio Berlusconi's Italy, actors have no right to unemployment benefit, but are classified as freelance workers. "Perhaps 5 per cent of our members can meet their monthly bills," says Massimo Ghini, secretary-general of the biggest actors' union, the Sindacato Attori Italiano, which supports the French strike. Ghini's message to the French protesters is: "You are resisting for us as well, because our goal is what you are fighting to defend."
There is more at stake here than just arrangements for the unemployed. Across Europe, public funding for the arts is in crisis. Business sponsorship, on which the arts rely so much more now than 20 years ago, tends to favour heritage art and harmless high culture. In theatre, as the Royal Shakespeare Company has shown, that means the end of the ideal of an ensemble.
The French have resisted these "modernising" and globalising developments, especially in the cultural sector. They took a stand against the Gatt agreements, which would have made French cinemas even more vulnerable to Hollywood blockbusters. (When strikers brought shooting for Jack Nicholson's latest film to a halt in Paris early this month, the actor warned that American movie-makers wouldn't come to work in France any more.)
What French revolutionary spirit inspired the young artists and technicians to replay the heroism of the Parisian sans culottes in the streets and popular assemblies of Avignon? Ariane Mnouchkine, whose emotive play about justice for asylum-seekers, Le Dernier Caravanserail, had been booked for 21 performances, was booed when she said: "I must tell you that I would have preferred something other than this self-destruction, this bonfire that you're preparing."
"C'est fini, '68," shouted an angry Avignon hotelier the other day. The costs of cancelling the festival are great: reimbursing 70,000 tickets; paying theatre companies for contracted but abandoned performances; the lost revenues from tourism in the town, estimated at 23 million euros. Festivals may disappear. Arts funding may suffer. "A terrible waste," says the French minister for culture, Jean-Jacques Aillagon. "The public, the artists, the technicians have been held hostage to trade union propaganda." At the same time, Aillagon has offered to help the festivals deal with their financial crises, and promised a new look at "the total disposition of the state and of local government in the service of creation". But will it be just another market-inspired initiative?
The squares, the cloisters and the gardens of Avignon are filled with actors, but they are discussing culture, not making it. The quarry outside town where Peter Brook staged the world premiere of Mahabharata is silent. His Death of Krishna will not be performed in the Jardin de la rue de Mons. Bartabas's company of horses will not play in the Palais des Papes, nor Shalom Anski's The Dibbuk at the CloItre des Celestins. There is nothing but pain in the annulment of the Avignon Festival. As its director, Bernard Faivre d'Arcier, said in his emotional speech calling it off (it would have been the last festival he directed): "I take this decision la mort dans l'ame - with death in my soul."
Michael Kustow is the author of theatre@risk (Methuen)