Thatcher Heads Into EC Summit on the Defensive

AFTER the prime minister's first-ever defeat in a national election, no one is sure how deeply Margaret Thatcher has been chastened by British voters. One measure of Mrs. Thatcher's response to the disastrous results reaped by her Conservative Party in European Parliament elections will be a two-day meeting in Madrid next week with other leaders of the 12-member European Community. The summit, which begins Monday, will focus on the pace of Western European economic and social integration.

Many Conservatives blame the prime minister's strident anti-EC campaign for their party's losses. They look to the Madrid summit as a test of how flexible and conciliatory she can be after an election that handed the opposition Labour Party its first nation-wide victory in over a decade and hinted that the Iron Lady is not invincible.

But Thatcher's advisers insist that she will not compromise her defense of Britain's interests, as she sees them, nor back down from her opposition to European monetary union and a charter outlining the social dimensions of the community.

``She is the strongest-placed political leader in Europe,'' says a senior Thatcher adviser. ``We go there to argue what we believe is a sensible case.''

That case includes opposition to a full program of monetary and economic union - which is being urged by France and West Germany - as well as rejection of a socialist-style ``social charter'' for the community which includes an affirmation of workers' rights.

Anti-marketeers in the British Parliament say that full monetary and economic union would involve surrendering more power to the European parliament, especially control over taxation and public expenditure.

THESE issues are contentious not only in Britain. EC observers say that without cross-party consensus at home, other European leaders may not be confident enough to press their views against Thatcher's strongly held positions.

``None of these issues can be taken further forward without going to [the] highest level,'' says Helen Wallace, specialist in West European affairs at the Royal Institute of International Relations in London. Other EC leaders would not be able to push Thatcher into a corner unless they could agree among themselves, she adds.

EC leaders have been asked to accept a report from Jacques Delors, president of the European Commission, which outlines a three-stage program on monetary union. The first stage proposes the convergence of national economic policies and urges that EC currencies join the European Monetary System (EMS). Follow-up stages call for collective decision-making in economic policy, EC rules for national budget deficits, a European central bank, and a common European currency.

Thatcher is willing to discuss the first stage though she has not yet said when, if ever, Britain will join the EMS. She remains, however, firmly opposed to stages two and three. Thatcher is also opposed to the social charter, arguing that it would let socialism in through the ``back door'' after having expunged it from Britain over the past 10 years.

Thatcher advisers insist that the prime minister is not anti-European and deny she is opposed to cooperation. ``We don't accept that we're negative,'' the adviser says. ``We accept that we're one of the most positive forces in the European Community.'' It was Thatcher who finally killed the argument that Britain did not belong in Europe, say the prime minister's defenders. Even the Labour Party, once opposed to Britain's membership in the EC, now endorses it.

Finally, the adviser adds, ``Let's just remind ourselves that Britain is not the only country in Europe that defends its interests.''