Thatcher stresses need for peace talks during Israel visit But British effort unlikely to restart Mideast peace process

British Prime Minister Margaret Thatcher's four-day visit to Israel produced a lot of goodwill and very little hope that the stalled Middle East peace process will be restarted any time soon, senior Israeli government officials said after her departure Tuesday.However, Israelis welcomed Mrs. Thatcher's indications that Britain believes an alternative Palestinian leadership to the Palestine Liberation Organization must be found if peace talks between Israel and her Arab neighbors are to be pursued. Israel has campaigned hard to convince the world that the PLO is a terrorist organization and unacceptable as a peace-negotiating partner. But the Arab world and the European Community say the PLO must play a role in any negotiations.

Thatcher said that Britain still believes the PLO should be included if it renounces terrorism and accepts UN Security Council Resolution 242 as the basis for talks with Israel. That resolution implicitly recognizes Israel's right to exist within secure boundaries while calling for withdrawal from the territories it has occupied since the 1967 Arab-Israeli war.

Thatcher said one reason for her visit, the first by a British prime minister, was to explore ways Britain could further the peace process. But the Israelis said they harbor no illusions that Britain can play more than a peripheral role in breaking the deadlock that developed in January when Jordan's King Hussein and PLO chief Yasser Arafat ended a year-long effort to start peace talks with Israel.

There was not even a ripple in official circles when she said ``it is not in Israel's long-term interest to be an occupying power.'' Her visit with eight West Bank Palestinian leaders, who petitioned that Britain talk to the PLO, was praised by Prime Minister Shimon Peres.

But Thatcher's suggestion that Israel allow elections in the occupied West Bank and Gaza Strip as a means of creating a moderate Palestinian leadership was rejected by Defense Minister Yitzhak Rabin, who said it would be odd for Israel to allow West Bank elections when no Arab state allows democratic elections. It was the only point of obvious disagreement in Thatcher's talks.