First, there was a leak from FT S&P ratings warning to top euro nations and then it really happened:

Pdf uploaded by S&P here

Does it matter? Yes and No. Will have to wait for the markets to open tomorrow, although SPX and EURUSD moved a bit after FT put out the news.

The Euro Area monetary union has designed itself to be dependent on rating agencies. For example, the “Eurosystem Credit Assessment Framework” outlines what kind of collateral are acceptable for borrowing (by banks) from their home National Central Bank. So eligibility and “haircuts” depend on ratings. If a national government’s rating gets downgraded, most private sector securities issued by the nation can be impacted. It is true that for a while, some issuers had their ratings higher than their sovereigns (possible!), time has arrived when they will be impacted too. With a general shortage of collateral, this will make the situation worse.

And of course, if markets start pricing a higher credit risk based on S&P’s opinion, there needn’t be an explanation of how things can go wrong.