SVETLA NAD SAZAVOU, Czech Republic, Oct 7, 2008 (AFP) - 'This is the first time I've seen those tough guys cry. It's a shock,' says Josef Bohm, deputy mayor of Svetla nad Sazavou in central Czech Republic.

One in five inhabitants of the town worked at the Sklo Bohemia factory, famous for the production of lead crystal. Last week, the company announced it was winding up and sacking its 1,250 staff.

The tension in Svetla in the streets, shops and pubs is palpable.

'On Tuesday morning, I went to the town hall, as usual, but everything seemed strange and I thought: My God, what's happening? I realised that the streets are absolutely empty. There were usually dozens of people coming from the night shift,' the deputy mayor recalls.

The tradition of lead crystal production in Svetla nad Sazavou dates back to 1861. The factory, first nationalised by the communists and then privatised in the 1990s in a switch to a market economy, was expanded several times. The last expansion took place in 2001.

The population of the town followed the industrial development, rising from 2,500 inhabitants in 1970 to the present 6,000.

'The sadness has overcome all of us,' says Alena Kotarova, an assistant in a shop selling crystal, one of the most famous tourist gifts the country has to offer.

The shop's glamorous shelves contain the products of the factory: chiselled glasses, cups, vases, carafes and trays.

Local authorities are now afraid the closure might cause an exodus. Some of the people in Svetla have already offered their flats or houses to real estate agencies. Mothers who have lost jobs have withdrawn their kids from kindergartens.

This remote mountainous region offers few job opportunities. Within 50 kilometres (30 miles), the car maker TPCA, computer parts producer Foxconn, and diesel pumps maker Bosch Diesel are hiring staff.

But the glassmakers, particularly the older ones, see the windup as a tragedy.

Sklo Bohemia is the first victim of insolvency proceedings imposed in September on its owner Bohemia Crystalex Trading (BCT) and its china-making partner company Porcela Plus (PP), which employed about 7,000 staff in a dozen plants.

The once prosperous factory has now debts worth 4.0 billion koruna (160 million euros, 228 million dollars), caused by higher power, gas and raw materials prices, as well as by tougher competition, above all from Asia.

In 2007, Sklo Bohemia reported a loss of four million euros on 52 million euros in sales.

BCT, the largest Czech glass-making group, is in the hands of two Czech entrepreneurs who own a 50 percent stake together.

'Many people here think that the owners are thieves. In my opinion, they simply overestimated their abilities and possibilities,' says Sklo Bohemia unions head Stanislav Vanek.

He adds one of the biggest mistakes was the company's voluntary withdrawal from the Russian market after the fall of communism in 1989, and the focus on the American market, which has proved fatal as the dollar started to tumble while the Czech koruna posted gains.

The state, which controls 49 percent of the company, has refused to offer a rescue plan for the factory.

Like many others, Stanislav Vanek still believes a new owner will save the factory.

'But it would have to be fast. If the master glassmakers give up this job that is passed from generation to generation, it will be over,' he says.

Meanwhile in the factory courtyard, master glassmakers and ordinary workers are slowly walking out of the factory, carrying their belongings in plastic bags and clutching a peculiar farewell gift -- a small box of Christmas chocolates donated by the unions. None of them wants to talk.