March 11, 1984

WHEN Mexico's new Government slashed public spending and reduced real wages last year, it won accolades from Western bankers eager to believe that austerity was the answer to Latin America's debt crisis. Today, that confidence has been shaken. The austerity measures demanded by the International Monetary Fund and the big American and European banks have helped to thrust both Mexico and Brazil into recessions that are eroding their capacity to meet future debt obligations. And the newly-elected Governments of Argentina and Venezuela seem determined not to pay a similar price to appease their creditors. So a new Latin debt crisis is brewing, probably more perilous and certainly more political than in the recent past. This time the issue is whether Latin America's four biggest debtor nations can achieve economic recovery and political stability while continuing to make huge interest payments on their foreign debt.

Secretary of State George P. Shultz has warned Congress that passage of a bill to move the United States Embassy in Israel from Tel Aviv to Jerusalem could provoke a wave of anti-American violence throughout the Islamic world. Legislation requiring such a move has been introduced by Senator Daniel Patrick Moynihan, Democrat of New York, and has 34 Senate co-sponsors. A similar bill, introduced in the House by Representatives Tom Lantos, Democrat of California, and Benjamin A. Gilman, Republican of Middletown, N.Y., has 180 co-sponsors. A Moynihan aide said that the bill, which has received very little publicity, had been picking up support week by week as more members of Congress became co- sponsors.

The 31 children in Alvenia P. Hunter's second-grade class at the Pratt Elementary School in Birmingham, Ala., began the school day Thursday as they do every day, by bowing their heads for prayer. In unison, they recited: ''O, help me please each day to find new ways of just being kind. At home, at work, at school and play, please help me now and every day. Amen.'' Mrs. Hunter's class is one of many across the nation where, despite the Supreme Court's prohibition of organized prayer in the schools more than 20 years ago, students continue to recite prayers, sing hymns or read the Bible aloud. Many more students observe a period of silence in which they can pray if they want, a practice the Supreme Court has neither upheld nor rejected.

They had come so close. But after a frantic final few seconds of regulation in which they failed to get the ball into the hands of their gem, the freshman Dwayne (Pearl) Washington, for what could have been a winning shot, the Orangemen of Syracuse lost in overtime to Georgetown, 82-71, in the championship game of the Big East tournament last night at Madison Square Garden. With the victory, the Hoyas raised their record to 29-3 and became the first team in the five-year history of the conference to win both the regular-season and conference titles in the same season. Georgetown, the No. 2- ranked team in the nation last week, could be No. 1 this week following North Carolina's upset loss to Duke.

ATLANTA F OR months, Walter F. Mondale played peacemaker on the campaign trail, warning his rivals for the Democratic Presidential nomination that attacks on one another would only hurt the party's chances of beating President Reagan. But last week Mr. Mondale abruptly shelved his speak-no-evil politics. From Boston to Tampa, he denounced Senator Gary Hart as a cold, aloof newcomer who would betray the Democrats' bedrock ideals of fairness and compassion. ''Where's the heart? Where's the guts?'' Mr. Mondale exclaimed as he pressed his argument that Mr. Hart has severe character deficiencies. ''It is not just a horse race,'' he added later in the week. ''This has become a battle for the soul of the Democratic Party and for the future of our country.'' It was also a battle to save the Mondale campaign from total collapse. Mondale strategists acknowledged that the attacks were a last-resort effort to slow the advance of Mr. Hart, who since the Iowa precinct caucuses on Feb. 20 has wiped out Mr. Mondale's standing as the party's front-runner.