patrick.net

9 EU Nations downgraded, 7 Affirmed:
http://www.bloomberg.com/news/2012-01-13/france-to-lose-aaa-from-s-p-afp-says-citing-state-official.html

Am I the only one freaking out over this?

After Italy's downgrade last October, their 10Y bond yields went over 7%. This pushed them past the Keynesian endpoint, and their economy was no longer sacrosanct. The EU solved the problem with Italy via ringfencing.

With these downgrades, and succeeding downgrades to follow, their bond yield goes up as their ratings go lower. Of course, bigger bond yields mean larger interest payments which, in turn, stresses their economy. A more distressed economy causes more downgrades, and the downward cycle continues.