The new Greek Socialist government has sharply rebuffed the suggestion by a top Libyan diplomat in Athens last week that the Israeli diplomatic office in Greece be closed because it is a center for spying activities.

"Libya is a friendly country, but Greece will make its foreign policy its own way," one government official said today.

Greece, where the Panhellenic Socialist Movement (Pasok) was elected to power last month, stands alone in the European Common Market in recognizing Israel de facto, but not de jure. Instead of embassies, the two countries have only "diplomatic representations" in each other's capitals.

In their first week in power, the Socialists said they would be upgrading the diplomatic status of the Palestine Liberation Organization's office in Athens.

Speaking at a press conference in which he praised Pasok for its "clear-cut" policy toward the Palestinians, the new head of the Libyan mission, Mohammed Gamoudi called Friday for the closing of the Israeli office.

"It should be closed down, and all Israeli diplomats expelled. It is nothing but a nest of spies and a center for Zionist terrorism," he said.

The statements by Gamoudi, characterized as "rubbish" by Israeli diplomatic circles, are understood to have irked the Greek government, which has indicated to the Libyans that it does not welcome dictates on foreign policy from any outsider. In a terse comment, a government spokesman said, "Greece will formulate its own foreign policy, based on its interests as a nation and on the interests of its people."

"There is absolutely no thought of closing down the Israeli office," a government official said privately.

Diplomatic sources in Athens indicated that following the decision to upgrade the status of the PLO "liaison and information bureau" in Athens, the Greek government issued private assurances that this status will be precisely equal with that enjoyed by the Israelis, which is less than the full embassy status accorded the Palestinians by Moscow.

The principle of equal representation was also stated by Prime Minister Andreas Papandreou in a recent televised interview with ABC.