The downgrade of Euroland bonds has been like the green bottles song. Now there is just Germany with a stable AAA rating from S and P. The Netherlands, Finland and Luxembourg are on AAA with negative watch. (apologies for leaving out the two small ones earlier, based on a radio report which I have now properly checked out) I pointed out a long time ago on this site that the famous big bazooka EFSF, the fund they said would rescue Euro countries in trouble, always rested on their ability to borrow on the strength of their collective credit rating. So far they have borrowed very little for this fund. That has just got more difficult, as the EFSF’s own credit rating must be weakened by the downgrades of Euro country bonds.
As S and P say, they do not just have a problem of spending and borrowing too much. They also have a problem of earning and growing too little. They need to tackle both those problems . The Euro makes solving the second one far more difficult.
Outside the Euro in Europe Switzerland, Norway, Sweden and the UK are on a stable AAA rating. The Agency has taken into account the problems of governance and the inflexibility of the single currency in its latest downgrades.