Of the two latest twists in the economic saga of Greece – the downgrade of its public debt to junk status by Moody's and renewed interest by China in investing there – markets have reacted more visibly to the former. But the latter matters more.
That the four-notch downgrade upset markets on trigger alert for any bad news is no surprise. The move excludes Greece from some developed market bond indices, forcing fund managers tracking those indices to cleanse their portfolio of Athenian promises to pay.
That does not mean Moody's judgment is sound. If anything, Greece's prospects are better now than they were a few months ago. The commitment of money by the International Monetary Fund and eurozone governments gives Greece breathing room to control its finances. First-quarter data suggested Athens had so far managed to stay on track with the IMF- designed austerity programme.