The agency also downgraded Slovakia, Slovenia and Malta.
Moody's also put France, Britain and Austria on "negative outlook", which implies there is a 30% chance of a downgrade in the next 18 months.
It said weak growth in Europe was hampering efforts to deliver economic reform and austerity measures.
Moody's delivered the sharpest downgrade to Spain which had its rating lowered two notches to 'A3'.
Italy was cut by one notch to 'A3' and Portugal was lowered by a smaller margin - a step to 'Ba3'.
In its report the agency attributed its moves to "the uncertainty over the euro area's prospects for institutional reform of its fiscal and economic framework".
It also questioned whether European leaders would assemble the firepower needed to deal with the crisis.