Just as our Reserve Bank delivered its first Financial Stability report for the year, the Greek economy has once again shaken global markets.

The bank was fairly sanguine about international markets, though it pointed out the rise in worries about sovereign risk offshore. The tone was positive. Earlier this morning RBA Assistant Governor (Economics) Phil Lowe again made a point of warning about the dangers of a housing boom:

“It would obviously be unhelpful if a speculative cycle were to emerge on the back of the recent strength in housing prices. This is an area that lenders and current and prospective home owners will need to watch carefully over the months ahead.”

But he noted that while the housing market had been very buoyant with auction clearance rates high and measures of home prices rising by around 1% a month, there were signs the market might be cooling. He made it clear the RBA was not seeing the sort of activity in the 2002-03 boom where lenders relaxed standards as they chased business. In many respects his speech was more direct than what the bank said in the report.

But the EU leaders summit, starting tonight, could see a greater threat, setting the scene for some sort of resolution of the dramas over assisting Greece. Just don’t depend on it. Four or five conflicting positions have emerged from France, Germany and others in recent days on whether Greece should be helped, how to help it and whether the International Monetary Fund should be involved.

So confusing has been the reactions and remarks that when Fitch Ratings cut Portugal’s credit standing. As expected by many in the market, the Euro fell sharply, hitting a new all-time low against the Australian dollar (over 68 Eurocents). The Aussie fell against the Greenback by around 0.80 of a cent to around US$90.80. Gold, oil and shares weakened as the Greenback rose. It was an edgy response to what should have been a long-anticipated move.

Not helping was the continuing public opposition from the European Central Bank to early IMF involvement in Greece or any other struggling Eurozone member (now called The Olives: Greece, Italy, Spain and Portugal). The ECB wants to see Greece and others show real signs of hacking and slashing before aid is given — a sort of kilo of flesh before a blood transfusion will be allowed approach?

In fact, the brawl is now more between the ECB and Germany, led by Chancellor Angela Merkel and its central bank, the Bundesbank.

The nervousness in Europe ignored really good news on the economy. Germany is starting to see real momentum in its economy as the cheaper Euro breathes new life into exports and the the Eurozone economy, which had been slowing noticeably. German manufacturing led an unexpectedly strong growth spurt in March, with figures out yesterday showing it grew by the fastest rate since the mid 1990s, while business confidence in the region’s dominant economy hit a two-year high.

A day earlier figures showed Japan’s export-led rebound remained alive, but a bit tired. The volume of exports was down 1.7% from January, but the total for the month was up more than 45% on a year ago — which, it has to be said, was when exports plunged 49% on February 2008.

In America though, US housing sales, new and existing, were weaker last month. The reason? Those Snowstorms, according to all the pundits. But some tried to argue the fall in existing home sales was not as bad as forecast, so that was ‘bullish’. But they couldn’t spin the slump in new home sales to the lowest ever recorded, an annual rate of 308,000. The problem with blaming it on the snows of February is that home sales have been falling now for four months, and there’s a tax credit in place to the end of April that’s supposed to help boost demand.

And for the farsighted regulator, it was a timely reminder that Greece’s problems and the arguments it has generated, are part of a bigger question: after Greece, who’s next? Yes there’s the Olives, but there are two highly indebted big economies that remain vulnerable right now — the UK and the US — both of whom are sliding towards the bottom of the AAA credit rating criteria with huge deficits, rising debt levels and sluggish economies.