The downgrades are indicitive of the risk of investing in bonds issues by those countries. This has the ability to affect the interest rates those bonds have in the market. Making new debt issues more expensive and making older debt issues more difficult to roll over. In a situation where declining GDP happens it could have the potential to cause a real risk of default.
That then transfers over into the credit default swaps and derivitives. It also has the effect of tieing up money that could be going toward the bonds themselves. This "outside money" effect means that people with no financial risk in the assets are making bets with each other. We don't really know who has what bets with whom or if their capitalization levels are adequate to cover the losses.
Once these positions are taken on they always exist somewhere in the market(usually). That means that even when they are sold that loss is transfered to the system in some manner. This can cause non linear rigging. Where scenerio mapping is being used to cause the value of your book to go up. The whole thing is very dangerous and pointless. It's essentially the same concept as penny auctions. It's using the concept of the individual against the whole. The banks are essentially destroying themselves though this process without even realizing it. We just can't know how deep their planning really is.