2012Jun4 Orders hosed down

Economy:

Companies placed fewer orders to American factories for the second consecutive month and a key measure that tracks business investment plans fell, the Commerce Department reported Monday, adding to evidence that the economy is weakening.

The declines suggested companies may be worried about a weaker American job market, which could crimp consumer spending. Businesses may also fear the worsening European debt crisis and slower growth in China could slow demand for exports.

Demand for durable goods, items such as autos and aircraft that are expected to last at least three years, were flat in April. That represented a downward revision from a preliminary estimate that durable goods orders had risen a slight 0.2 percent in April.

Orders for nondurable goods, which include processed food, chemicals, gasoline and paper, fell 1.1 percent in April. Part of that drop probably reflected lower gas prices, which have tumbled since peaking in early April. The figures were not adjusted for inflation.

United States of Europe:

After falling short with her "fiscal compact" on budget discipline, German Chancellor Angela Merkel is pressing for much more ambitious measures, including a central authority to manage euro area finances, and major new powers for the European Commission, European Parliament and European Court of Justice. She is also seeking a coordinated European approach to reforming labor markets, social security systems and tax policies, German officials say.

Until states agree to these steps and the unprecedented loss of sovereignty they involve, the officials say Berlin will refuse to consider other initiatives like joint euro zone bonds or a "banking union" with cross-border deposit guarantees - steps Berlin says could only come in a second wave.

"The fundamental question is relatively simple. Do our partners really want more Europe, or do they just want more German money?" a government official in Berlin said.

If European countries go ahead, the steps would represent the most significant policy leap since they agreed to give up their national currencies and cede control over monetary policy 13 years ago. But the hurdles are daunting.

"The world is not coming to an end; rather, it feels as if we are on the doorstep to another major European integration move," said Erik Neilsen, chief economist at Unicredit. "But why do these initiatives only come when we are on the edge of the cliff where the risk of an accident is so much higher?"

Group of 7:

Canadian Finance Minister Jim Flaherty said ministers and central bankers of the United States, Canada, Japan, Britain, Germany, France and Italy would hold a special conference call, raising pressure on the Europeans to act.

"The real concern right now is Europe of course - the weakness in some of the banks in Europe, the fact they're undercapitalized, the fact the other European countries in the euro zone have not taken sufficient action yet to address those issues of undercapitalization of banks and building an adequate firewall," Flaherty told reporters.

The disclosure of the normally confidential teleconference came as European Union paymaster Germany said it was up to Spain to decide if it needed financial assistance, after media reports that Berlin was pressing Madrid to request aid.

A G7 source, speaking on condition of anonymity because of the sensitivity of the issue, said there were concerns about the risk of a bank run in Spain, which is struggling to recapitalize nationalized lender Bankia and smaller banks stricken by the collapse of a property bubble.

"There's a heightened sense of alarm over developments in Europe, particularly in Spain," the source told Reuters. "There is concern on whether there will be a bank run in Spain that could have repercussions beyond the euro zone.