After a storybook royal romance that has distracted delighted Britons from the woes of a declining economy, Buckingham Palace yesterday announced that Prince Charles, the popular 32-year-old heir to the British throne, will marry 19-year-old Lady Diana Spencer, a blue-blooded childhood neighbor and distant cousin.

The slim, soft-spoken earl's daughter who grew up on the royal family's vast Sandringham estate in northeastern England will become the princess of Wales and future queen of England at a glittering wedding that will attract royalty and dignitaries from around the world and brighten the dark days of the depths of Britain's worst economic slide since the 1930s.

Declaring that Lady Diana will make a "fine" princess of Wales, joining him in a busy schedule of public appearances and travel, Charles said, "She'll be 20 soon and I was about that age" when he began carrying out royal duties.

Londoners thronged the gates of the palace following yesterday morning's announcement of the royal couple's engagement by the prince's parents, Queen Elizabeth II and Prince Philip, while Charles and Lady Diana, wearing her large sapphire and diamond engagement engagement ring, posed for pictures and talked briefly to reporters inside. The couple then strolled arm-in-arm, laughing, through the palace gardens. Prince Charles hugged Lady Diana as show showed her ring to photographers.

The prince had been under steadily increasing public pressure to marry during his years of squiring a changing cast of beautiful young women to various royal estates, hunts, polo matches, balls and parties. He said he was delighted and happy that Lady Diana said yes to his fromal proposal, made earlier this month during an intimate dinner at the palace.

"I'm surprised she is brave enough to take me on," he said. Lady Diana had been besieged for months by the British press during their intensely publicized courtship.

"I knew the pressure was on," said Lady Diana, "But it wasn't difficult in the end. I knew what i wanted." Dubbed "shy Di" by the London tabloids, she appeared demure but quite composed in her first formal media appearance.

Friends have reportedly said she was eager to marry the prince, a 16th cousin once removed and fellow descendant of the Tudor King, Henry VII, after she was introduced to him three years ago at a pheasant shoot on the Spencer family estate in Northhamptonshire. They were introduced by her older sister, Lady Sarah, who was then Charles' girlfriend but told friends the prince was not yet ready to marry. Lady Sarah later married someone else.

"Charles came for a shoot and we met in a plowed field," said Lady Diana, who had first seen him many years before when she was a small child and he a teen-ager among the Spencer and Windsor children sharing games and a heated swimming pool at a royal estate.

"What a jolly, amusing, attractive 16-year-old she was," the prince recalled yesterday of their meeting at Althorp. "I don't know what she thought of me"

"Pretty amazing," Lady Diana said.

The Prince said their romance began when Lady Diana visited the royal family at their Balmoral Castle in Scotland last July. "We began to realize there was something in it," Charles told one interviewer at the palace today.

From then on, they met increasingly frequently under the close, often irritating scrutiny of the British press, which had unwittingly helped break up earlier royal romances with young women who coulnd't stand the pressure or who were indiscreet with inquiring reporters.

Lady Diana was judged to have held up well while newsmen laid siege to the apartment, bought by her father, that she shared with three other young women in the fashionable London neighborhood of Kensington. She was followed by reporters and photographers when going to the store and to her job as a teacher at a private kindergarten in nearby Pimlico. She was mobbed when discovered going to and from Sandringham and other locations for outings with Charles and the royal family.

When she went to Sandringham to help the royal family to celebrate Charles 32nd birthday in November, she outfoxed the press by changing cars and hiding out briefly with a neighbor, while the prince led the pursuing newsmen on a careening car chase through the English countryside.

The queen complained personally to newsmen hounding the royal family from public roads running through Sandringham and her press secretary lodged a formal complaint about an erroneous tabloid newspaper story that said Lady Diana had time alone with Charles in a private railroad car. Much has been made by the rest of the press about Lady Diana's innocence. A lack of a romantic past is believed to be desirable by the royal family for a future queen.

Lady Diana remained unfailingly unflustered and discreet throughout, usually greeting newsmen with a smile, sometimes a blush, and a polite no comment. Charles and even his sister, Sister Anne, who seldom speaks to the press, joked with newsmen staking out Sandringham about their failure to find Lady Diana during her visits there.

The prince finally popped the question while the couple dined in his small Buckingham Palace apartment on Feb. 6, just before Lady Diana left for Australia to escape the press, relax and comtemplate her future. "I wanted to give her a chance to think about it, to think if it was all going to be too awful." Charles yesterday told an interviewer as he and Lady Diana sat on a sofa in the room where he proposed.

"Oh, I never had any doubts about it." she said.

The prince also asked Earl Spencer for permission to marry his daughter. "I wondered what he would have said if I had said, 'no,'" the earl said in a BBC radio interview yesterday.

"She's a very good-natured girl," he said. "Publicity doesn't worry her. She'll take it all in her stride. She's very practical and down-to-earth, a very good housewife."

Yesterday, Lady Diana began a monarch's life. She has left her teaching job and apartment for a temporary royal residence. After her marriage to the prince, she will live with him at his new country estate at Highgrove in Dorset, south of London. The estate house is being extensively refurbished.

"It's just like camping," the prince said yesterday. "We've only got one room decorated downstairs, and the bedroom organized. Otherwise, everything's being painted. There's nothing yet, no curtains, carpets or furniture -- nothing."

Asked about their age difference, the prince said, "Diana will certainly keep me young. You're only as old as you think you are."

Lady Diana is a strikingly attractive young woman with large blue-gray eyes and short blond hair. She wears little makeup or jewelry and has usually been seen in public wearing simple skirts, sweaters and low-heeled shoes. At 5-feet-9-inches tall, she is just two inches shorter than the equally trim prince. He also dresses plainly, even somewhat unfashionably, when not outfitted in formal clothes or a military uniform for state occasions. w

Like the prince, she enjoys the out-of-doors and swims, skis and bicycles. She confessed yesterday to not particularly enjoying horseback riding, a a favorite pastime of the prince, who is an avid polo player and accomplished amateur jockey. "I fell off a horse and lost my nerve."

Like many other upper-class Englishwomen, Lady Diana attended a private school for girls and, briefly, a finishing school in Switzerland before moving to London and working as a nanny and nursery school teacher. She also tap-dances and is interested in the ballet and opera. The prince likes classical music and can play the cello.

Lady Diana's family has been part of the nobility and in the service of British monarchs since the 18th century. Her ancester, the duke of Marlborough, was a celebrated military hero. Her father, the eighth Earl Spencer, a wealthy landowner, served as equerry to both Charles' grandfather, King George VI, and his mother, Queen Elizabeth. The queen is godmother to Lady Diana's younger brother. Lady Diana's father and mother divorced in 1969 and both are remarried.

The late Sir Winston Churchill is another distant relative of Lady Diana's, and there are two Americans in the long branches of her family tree which include a great-grandmother on her mother's side. New York heiress Frances Work, who married English baron James Burke Roche in 1880, and a great-uncle by marriage, the late New York lawyer Guy Fairfax Cary, whose surviving son with the same name also lives in New York and is Lady Diana's first cousin.

Lady Diana is the most recent of a large number of young women who have been linked to Prince Charles over the years by the vigilant British press.

The first was Lucia Santa Cruz, daughter of the Chilean ambassador to Britain in 1967. The prince's first true love was said to Lady Jane Wellesley, daughter of the present duke of Wellington, who became annoyed by the constant media attention. Both Lady Jane Spencer (now McCorquodale) and divorcee Jane Ward were thought to talk too much to the press about the prince. Princess Marie Astrid of Luxemburg was Catholic, posing a potential constitutional problem for the future head of the Church of England. And heiress Sabrina Guiness and blond beauty Davina Sheffield appeared to be passing fancies.

Prince Charles has confessed to falling in love easily, but sources close to his social set have said he was shy and immature with women. There had been speculation in the british press that he preferred to remain a rich bachelor driving fast cars, riding in races and hunts and being rushed and kisseby by beautiful women wherever he traveled in the world. But those close to his social set thought it more likely that he was taking his time trying to find the right mate.

"He will not contemplate taking mistresses after he has taken a bride," one of the prince's contemporaries and biographers, Anthony Holden, now Washington correspondent for Britain's weekly Observer newspaper, has written. "Prince Charles' religious and moral convictions on the sanctity of marriage are firmly held."

He also has prepared seriously for the day, still far off, when he might be king. He is the first member of the royal family to earn a university degree and frequently speaks out about British trade problems, labor-management relations and British history.

The prince is conscious of the prestige and accessibility the British relish in their royal family and gladly help support with millions in taxpayers' money. The queen, by inheritance and stipend, is easily the wealthiest woman in the world. Prince Charles mingles constantly in crowds, speaks to everyone he meets and remains unflappably courteous and often humorous no matter how much strain his schedule puts on him.

He cuts a dashing figure, providing vicarious thrills for the average British bloke. He can fly a jet, repair a helicopter and jump from a plane with paratroopers. He has tried dangerous deep-sea diving and wind-surfing. He has identified himself as royal sponsor with daring British expeditions exploring uncharted corners of the globe.

Now the glamour of his romance, engagement and wedding are helping uplift britain during a trying year, with some of the glitter rubbing off ini America. News magazines are plannng cover stories and Viking will publish an instant book on the wedding, which is likely to be the biggest Anglo-American social event since the prince's parents took their vows in Westminister Abbey where British kings and queens have been crowned and wed for 900 years.