In what may be the worst kept secret on Wall Street, Standard and Poor's announced it was lowering government bond ratings on nine countries in the euro zone.
A senior euro zone government official tipped off the downgrade to Reuters hours before.
John Chambers, head of sovereign ratings, Standard and Poor's:
SOUNDBITE: JOHN CHAMBERS, HEAD OF SOVEREIGN RATINGS, STANDARD AND POOR'S (ENGLISH) SAYING:
"So we had some good news on the monetary side on the political side it was pretty much in line with our expectations which led to the credit watch actions and that is now fed through to these ratings actions."
Italy, Portugal, Spain and Cyprus were cut by two notches - Austria by one.
But the most significant ratings change was of France, which lost its coveted AAA credit rating.
French finance minster Francois Baroin seemed to downplay the significance of the downgrade in a TV interview with France 2, but did concede France has to do more.
SOUNDBITE: FRENCH FINANCE MINISTER FRANCOIS BAROIN, (IN FRENCH WITH ENGLISH TRANSLATION) SAYING:
"What does this mean? It means we must pursue reforms. We must extend them. That is what the French President Nicolas Sarkozy and the Prime Minister, who will meet their management teams next week, wish for. There will be some strong proposals to boost growth. There will be some strong proposals in terms of competitiveness. We need to be daring. We have already have one weakness, which is our cost of labour. We need to preserve employment, and redistribute our economic machine."
But he says there's no talk of more austerity measures.
Meanwhile, Spaniards, out for the evening, questioned why anyone even trusts the ratings agencies.
SOUNDBITE: MADRID RESIDENT JAIME, (IN SPANISH WITH ENGLISH TRANSLATION) SAYING:
"They move by interests that we do not really know but they are not very reliable, at least I don't think they are. I rely more in the measures taken by each country than in these rating agencies which are the ones who have caused the collapse of Lehman Brothers because they did not know it was a business that raised doubts over the system. For me none of this riffraff is reliable."
The downgraded countries now face higher borrowing costs, which could further slow any progress towards ending Europe's two-year debt crisis.
Jill Bennett, Reuters