November 29, 1985

The West German economic recovery is proving even stronger than Government projections had foreseen. But efforts by the United States to get Bonn to step on the gas and assert its role as the engine of Europe are running into stiff resistance here. ''I am concerned at how lightheartedly we are urged again and again to fiscal stimulus,'' Karl Otto Pohl, the Bundesbank president, said in an interview. Bankers and economists agree that the Government's cautious fiscal and monetary policy mix has yielded rock-bottom inflation rates, now running at below 2 percent, and provided financial underpinning for a second year in a row with a record trade surplus, expected to reach $29.3 billion in 1985. And, with the crucial metalworking industry announcing last week that 206,000 jobs had been created since mid-1984, there has even been a sense of late that the worst may be over on the unemployment front.

When Detroit decides to design a more expensive version of a popular car, it usually means that the new model will have a few bits of additional chrome and a plusher interior. Pontiac's plan for the new Fiero GT, a high-priced offspring of the successful Fiero two-seat sports car, was dramatically different, however. Thanks to the Fiero's unique construction - a plastic skin of outer body panels attached to an independent steel ''space frame'' - the General Motors Corporation division was able to retool quickly and at relatively low cost to change the styling from a chopped-off ''notchback'' look to a more streamlined ''fastback.'' G.M. officials and many others in the auto industry are convinced that clearly differentiated styling approaches are going to be critical to the future success of specialty cars like the Fiero, and family cars as well. And, they say, plastic is going to be critical to that effort.

The Federal Communications Commission division in charge of telephone services has ruled that it is legal for a local telephone company to provide service to business customers in another local phone company's franchise area whenever the customer requests the service. The decision sets new precedent in granting business customers flexibility in choosing a local phone company, commission officials said. The ruling, in a memorandum and order issued late Wednesday by the F.C.C.'s Common Carrier Bureau, overturned a ruling by the Texas utility regulatory authority, which held such service illegal on the ground that it violated state franchise laws.

An internal Israeli investigation has found that Jonathan Jay Pollard, an employee of the United States Navy, was working as an intelligence operative for a secretive Israeli counterterrorism bureau, a highly placed Israeli source said today. Israeli television reported tonight that the Cabinet was prepared to return to the United States the hundreds of documents Mr. Pollard is said to have obtained. But the Israeli source said Israel would not accede to an American demand that two Israeli diplomats involved return to the United States for questioning. In Washington, the State Department had ''no reaction'' to reports of the diplomats' return to Israel, a spokesman, Sondra McCarty, said. In Santa Barbara, Calif., where President Reagan is vacationing, he aides said he would likely ''speak to the nation'' about the recent series of spy arrests. [Page B22.] Report Is Nearly Complete The Israeli investigation, the source here said, was put together over the last week by Prime Minister Shimon Peres, Foreign Minister Yitzhak Shamir and Defense Minister Yitzhak Rabin, with the help of the chiefs of the branches of Israeli intelligence.

The old woman walked alone through the rain to Trinity School on the Upper West Side. At the door, a boy offered to take her coat. ''No, thank you,'' said the woman, Isabella DeSanctis. ''Just take my hand.'' Together, they walked to the auditorium, where Trinity students performed a variety show and served turkey dinners for the elderly residents of nearby housing projects.