Post-summit fallout: Schmidt maneuvers with Moscow; Thatcher tidies up at home; Margaret Thatcher sets the record straight

"You can no more go around looking for the philosopher's stone in politics than you can in alchemy. it doesn't exist." A late afternoon breeze stirs the curtains in the Small Dining Room at 10 Downing Street as Prime Minister Margaret Thatcher speaks. Outside, in a world buffeted by oil price rises, Iran, the Soviet invasion of Afghanistan, the Middle East, European Community (EC) problems, and stagflation, the winds are fiercer.

But on June 25, as Mrs. Thatcher talked for an hour with a small group of American journalists, she had reason to be pleased. The seven-nation economic summit in Venice a few days before had agreed that" the reduction of inflation" was its "immediate top priority" and had called for "determined fiscal and monetary restraint" to "break inflationary expectations."

It was a formula so close to the monetarist principles of her 13-month-old government that she could have written it herself -- and perhaps did.

Her critics, who speak not only from trade unions but also increasingly from the boardrooms of corporations strangled by high interest rates and a strong pound, say that she views monetarism as her particular philosopher's stone -- her panacea for all Britain's ills. Indeed, it is the point to which, doggedly and energetically, she returns again and again.

"I think for too long politics has really gone for the shortterm solution often at the cost of the long-term, real solution," she says. "We've tried to do patching up for too long. Now you've got to go through a time when you squeeze out the printed money," she explains.

The long-awaited U-turn in her policy appears to be nowhere in sight. The problem, she says, is to stick with the policy long enough "for people to see that you mean what you say and to make it work.

The prime minister speaks energetically, looking her questioners squarely in the eye. Now and then her scarab bracelet rattles against the polished wood table as she draws imaginary macro-economic graphs in the air. Economics, of her, has become a familiar sport -- and her answers, even as she talks about so impersonal a topic as exchange rates, are dotted with personal pronouns.

"There's nothing a government can do to resist the market," she says. "You can smooth it going down, and you can smooth it going up, for a day or two, but the strength of the pound will have its way if money is flooding in."

"People will say, 'Alright, if money's flooding in, it could pour pounds into the system and bring the exchange rate down,' but every pound I pour into the system increases the money supply which is not backed by goods and services. So bang goes my inflation target," she says.

Mrs. Thatcher gives long answers to short questions, often dwelling on background. It is a tendency that many find schoolmarmish and hectoring, but others admire as the zeal of a theoretician so committed to principles that she welcomes every oppotunity to explain them.

She is increasingly intrigued by international relations. "Far more of my time is taken up on foreign affairs than I ever thought before I came here becuse so many people come to London," she says with obvious relish.

On the world's topics of concern she offers the following:

* Afghanistan. "I don't see any negotiated settlement -- they [the Soviets] have got to withdraw," she says. Unlike French President Valery Giscard d'Estaing and Germany's Chancellor Helmut Schmidt, she would not consider meeting Soviet President Brezhnev at the moment. "But then," she quips, in reference to her well-known anti-Soviet stance, "I'm not likely to be asked."

* Oil. "You can't condemn all the OPEC countries, because OPEC has not been monolithic," she says, echoing a new and softer line toward the Organization of Petroleum Exporting Countries set forth by Energy Secretary David Howell a week before. The oil-producers will not stop raising prices "because we say so." Again the answer lies in explaining. "One has to show them that it's not in their interest to undermine the economies of the Western world on whom many of them rely to recycly their monies or to invest their monies," she says.

* Iran. The sanctions, she feels, are making life difficult for the Iranians. The feeling at Venice, according to the Prime Minister, was that the hostages will released.

* Middle East. Asked whether there are any new approaches contemplated beyond the one agreed at the EC meeting earlier this months, she replies, "Oh, good, heavens, no: This one hasn't worked through yet." She draws attention to the importance of the EC communique in emphasizing the rights of the Palestinians. Will it lead to a solution? "I don't think it will come about quickly," she notes, pointing out that the United States, rather than Europe, must take the lead.

* Europe. Sorting out the difficulties of the Common Agricultural Policy will take "at least 18 months," since both France and Germany have major elections coming up and a solution will require "very strong positions," to be taken up by the heads of government.

She also dismisses the notion that the Western alliance is in dissaray. "I sometimes wondered when I saw the reports at the end of the first day whether I'd been at the same summit,' she said.

But summits, it seems, are not charmed circles. "I think sometimes the difficulty we have sitting there is that you thing we're going to have great magic pronouncement," she says. "There aren't any, or other people would have found them before us, or we would have found them separately," she adds. Then why have summits? "It does help to know that you're thinking along the same lines," she says.