ANDRES OPPENHEIMER German election results not good news

The economies of Latin America may soon feel the pinch of Germany's post-election political crisis and of Europe's growing troubles.
I don't know whether we're witnessing "the end of Europe," as economist Robert Samuelson predicted in The Washington Post in June, after France and Holland voted against the European Constitution. But the latest developments in Germany -- Europe's largest economy -- definitely bode badly for Europe, and for South American countries that depend heavily on European trade and investments.
Sunday's inconclusive election in Germany is likely to further slow that country's already sluggish economy. Opposition pro-free market candidate Angela Merkel won the election, but without enough seats in parliament to form her own government.
Regardless of who succeeds in forming a governing coalition -- Merkel or Chancellor Gerhard Schroeder -- Merkel's boldest economic reform plans are likely to be temporarily shelved.
Germany's economy may grow even less than the meager 0.8 percent projected for this year. Two days before Sunday's election, the International Monetary Fund downgraded its forecasts for Germany's growth in 2006 from 1.9 percent to 1.2 percent.
The rest of Europe is not performing better. The IMF has reduced its projected growth rates for this year in Britain, France and Italy, which are now respectively expected to grow only 1.9 percent, 1.5 percent, and zero.
And that may be only the beginning of Europe's troubles. Most Western European countries face a serious long-term problem: their people don't want to have children. Fewer and fewer workers are supporting more and more retirees, and this is straining Europe's pensions systems.
Low birth rates have forced Germany, France and Spain to import immigrants from Arab and African countries. But that, in countries with unemployment rates of nearly 10 percent, is creating a growing anti-immigrant sentiment, and exacerbating social tensions.
Of course, the solution to many of Europe's problems would be for Germany, France and Italy to cut their early retirement ages, 5-week-long vacations and other generous social benefits.
But Western Europeans want a socialist welfare system with the comforts of capitalism, and have not realized yet that there's no way that they can have it both ways.
All of this is bound to have an impact on Latin America, especially for countries in the region that rely heavily on European trade, investment and foreign aid. Consider:
UFor Brazil, Europe is the biggest export market. European countries buy 25 percent of Brazil's exports, compared to 21 percent from the United States, according to United Nations Economic Commission for Latin America figures.
UFor Argentina, Chile and Peru, Europe is the second-largest export market, accounting for 18 percent, 25 percent and 24 percent of their respective world-wide exports, the U.N. figures show.
UFor Colombia, Europe is the third-largest export market, accounting for 14 percent of its total exports.
ECLAC's head Jose Luis Machinea told me in a telephone interview from Santiago, Chile, that if Europe grows at about 1.5 percent less than the rest of the industrialized world for the next five years, as many economists expect, there would be a fall of nearly 10 percent in Europe's imports from South America over that period.
"It's not a dramatic impact, but it's something that could be worrisome over the medium-term," Machinea said. "Among other things, it reduces Latin America's diversification of exports."
My conclusion: What's happening in Europe is bad news for Latin America and for the United States. Sure, European officials say they will not retrench from their commitments to Latin America. But Europe is likely to be increasingly consumed by its own troubles for some time, and it's hard not to conclude that that will not have an impact on its trade, investments and foreign aid to the region.
X Oppenheimer is a Latin America correspondent for the Miami Herald. Distributed by Knight Ridder/Tribune.