Argentina's military government, breaking a long silence over Britain's recapture of South Georgia, announced this morning that Argentine forces were "maintaining their positions" on the island and that British reports of an Argentine surrender were "absolutely false."

In the first statement by the military junta in more than 24 hours, a communique issued shortly after midnight said reports subsequent to the British reports of the Argentine surrender indicated that special Argentine Navy forces were continuing to operate in the area around Port Leith, "in spite of the superior forces of the attackers."

The junta also denounced reports from London that a commando landed on the Falkland Islands, 800 miles northwest of South Georgia, as "part of a campaign unleashed by Great Britain with the end of confusing international public opinion."

The junta's statement early this morning followed a day of studied silence at Britain's actions while Argentina reacted with a mixture of confusion and renewed patriotism to the limited news of the military setback.

Until early this morning, the Argentine junta and other military officials had not expanded on a communique issued yesterday morning that conceded the "apparent initial success" of the British attack while maintaining that Argentine forces were still fighting in interior areas of the island.

President Leopoldo Galtieri remained in the presidential palace and was reported to be occupied with ceremonial functions. Newspapers and radio stations, meanwhile, relied on reports from London in broadcasting the news that fighting on the island 800 miles east of the Falklands had ended without significant casualties on either side.

Early this morning, a representative of the Argentine joint chiefs of staff told reporters that the British reports were wrong, but gave no Argentine account of casualties in the fighting.

Amid calls for moderation from civilian sectors, military officials gave no indication that Argentina was planning a military response to the British action.

The silence over Sunday's British military move appeared to be aimed at turning attention toward Argentina's newly bolstered diplomatic offensive in Washington.

Foreign Ministry officials here expressed hopes that the British assault on South Georgia would reverse what has been only moderate support for Argentina among other Latin American countries. Officials here expected the endorsement in Washington of a strong declaration by the 21 nations that are signatories to the Inter-American Treaty of Reciprocal Defense, also called the Rio Treaty.

The Argentine leadership now appears to hope that by exploiting Britain's military actions diplomatically, Argentina will be able to win new concessions in the long negotiations over the disputed South Atlantic islands.

The military junta reiterated Sunday night in a communique after the British attack that Argentina will insist on sovereignty over the Falklands and South Georgia in any settlement.

Officials appeared to encourage a patriotic rally called by the country's two national labor organizations in an attempt to boost what has been a flagging spirit of nationalism here in the face of the British military threat.

But the rally, held under darkening skies in the Plaza de Mayo in front of the presidential palace, mirrored the tension and uncertainty in Buenos Aires amid the official silence on the military situation.

In contrast to the last rally called by unions and encouraged by the government 17 days ago, which drew more than 100,000persons, tonight's demonstration was relatively small. The crowd, estimated by Argentine news services at about 10,000, was dominated by loyal union followers and activists hostile to the military government.

While rallying behind slogans denouncing Britain and the United States, the crowd also chanted refrains such as "We support the Malvinas, but not the dictatorship." Handbills called for the ouster of the unpopular economics minister, Roberto Alemann.

While cadres of youths chanted and cheered for television crews, much of the crowd ignored the demonstration and congregated in circles of 10 and 20, anxiously exchanging rumors and arguing politics. Many said they did not know whether Argentine forces continued to fight on South Georgia or whether there had been casualties.

The air of uncertainty was widespread in Buenos Aires through the day. There were rumors of emergency measures by the government to restrict financial activity and civil rights, but ministry officials joined in the military's strict silence.

Banks in Buenos Aires were once again swamped with depositors seeking to withdraw their savings. On the black market, the dollar reached 18,000 Argentine pesos--30 percent above the legal rate.

At midafternoon, thick crowds gathered in downtown commercial areas to read news bulletins displayed from office windows.

Union and political leaders strongly condemned Britain's attack and called for strong military reprisals.

One national union organizing tonight's rally, the General Confederation of Labor, issued a statement expressing "the most profound solidarity" with "our soldiers" and calling for the immediate seizure of British interests in Argentina.

The military government showed no sign of heeding the calls for an aggressive reaction, however, and a civilian spokesman aligned with the government backed the strategy of moderation and diplomatic exploitation of the military situation that the government is expected to take.

"What happened yesterday in the South Georgia Islands is an adverse event, but it should be judged in proportion to what these islands mean within the entire conflict with Great Britain," said the leading progovernment newspaper La Nacion in its lead editorial on Monday.

The only new details released here yesterday on Sunday's battle on South Georgia appeared in the newspaper Conviccion, which reproduced what it said was the last radio communications from an Argentine Navy detachment at Port Leith before the radio link was broken shortly after 5 p.m. Sunday.

The newspaper, which has strong links to the Argentine Navy, reported the naval officer saying, at 5:09, "A frigate is approaching here. The fire is beginning." Then, at 5:10 p.m., the office was reported to have signed off with "an embrace and a big kiss for all of you. Long live the fatherland!"

The private news agency Noticias Argentinas quoted a high-ranking Argentine Navy source as saying the loss of the South Georgia chain had been a "calculated risk" deliberately taken by the armed forces.

The Navy official was quoted as saying that the Argentine military believe the British tried to trick Argentina into weakening its defenses on the Falklands and coastal bases by making clear its intention to attack South Georgia.

The Argentine forces, the official said, foresaw this strategy and "avoided reinforcing the defenses on the islands , obligating the British to use many more troops than were justified" by the operation.