They use it to blackmail governments into making more and more cuts. At least when the IMF does it, they directly hold the purse-strings; Moodys and Standard and Poor (suitable names in both cases, especially the second) are just selling their opinions, which are of value only because people take them seriously.
At the extremes, it amounts to a form of economic terrorism.
'I kept the faith and I kept voting/ Not for the iron fist but for the helping hand' - Billy Bragg
that as soon as Hollande came into power his own office of budgetary control told him it would impossible to keep the promises he had made. That is not say that the cons would've done any better. The downgrade is just a reflection of their now current economic situation regardless of which party is in power.