NICOSIA, Cyprus (AP) — Ratings agency Standard & Poor’s lowered Cyprus’ sovereign debt grade one notch deeper into junk territory on Thursday and warned of further downgrades over concerns that the country’s troubled banks will continue to strain public finances.

The downgrade, from BB+ to BB, highlights the battle the island nation of less than a million people faces to fix its sagging economy after becoming in June the fifth country to seek financial aid from its partners in the 17-country group that uses the euro.