President Marcelo Rebelo de Sousa blocked the legislation, saying politicians did not explain why the change was needed and did not create enough safeguards to clarify the sources of private donations.

Traditionally in Portugal, parties operate on mostly public funds to avoid undue influence from private individuals or corporations.

They can accept some private funds but the amount is indexed and limited.

Carlos Cesar, parliamentary leader of the governing Socialist Party, acknowledged the change had been poorly explained.

Party leaders in the Republican Assembly, or parliament, agreed on Thursday to review the law in mid-February.