This is billed as last-chance week in the conflict between Argentina and Britain. If the two countries cannot find their way out of the box they are in, they may find themselves engaged against their mutual better judgment in a far wider and bloodier war.

The British government is under the pressure of its own keep-the-heat-on tactics, its public opinion and the gathering South Atlantic winter to bring its full available force promptly to bear. Otherwise its military option may fade, as much of its support in Europe already has faded. The Argentine junta would sit tight if it could, but it is under deepening economic duress, and its internal and international backing is unreliable in the long haul. Both countries have formidable weapons, and their pride is engaged. The relative restraint they have shown so far shows signs of wearing thin.

In the weeks since Argentina seized the islands, the elements of a settlement have been identified, first by Secretary of State Haig and, after the United States abandoned mediation, by United Nations Secretary-General Javier Perez de Cuellar. Mutual military withdrawal will be required, followed by the establishment of an interim regime and the onset of a negotiating process to determine the ultimate sovereignty of the islands, including the fate of the 1,800 residents.

Both Argentina and Britain are making a strenuous effort to assure that, if diplomacy fails, the onus will fall on the other side. But success in that effort will be cold comfort if it means further violence. Britain in particular must calculate not only the costs of a possible stalemate or defeat in a major military operation but the costs of success: these could include, in addition to casualties and damages to the fleet, the need to defend the islands thereafter, if only to demonstrate to a skeptical public that Britain had not sacrificed to regain the islands simply to turn them back.

The Falklands affair remains one of the simpler international disputes that has come along in the postwar period. Unquestionably, a peaceful settlement is within reach, but the politicians and diplomats on both sides still have some reaching to do to grasp it. They failed by getting their countries into this fix--the British by inattention and the Argentines by overreaching. They will not be forgiven if they fail to get their countries out.